What Happened:
Shares of computer processor maker AMD (NASDAQ:AMD) fell 6.3% in the morning session after competitor Nvidia announced a new AI chip family called Blackwell at its annual GPU Technology Conference (GTC). NVDA's event raised the bar for the industry. For instance, the company gave a specific example of a 75% reduction in power consumption for an LLM training project on Blackwell vs Hopper, an existing chip line. In addition, NVDA is also investing heavily into and making quick progress in the areas of services, omniverse, and robotics. To keep pace, competitors may need to invest more or face reduced market share.
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What is the market telling us:
AMD's shares are very volatile and over the last year have had 23 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 26 days ago, when the company gained 10.9% as chip and AI stocks surged alongside broader market gains, with the Nasdaq rising by 2.1%, the S&P 500 by 1.5%, and the Dow gaining 0.57% following Nvidia's outstanding earnings results. During its Q4'2024 earnings, Nvidia reported impressive topline results (7.6% revenue beat), big gross margin improvement, and EPS outperformance vs. Wall Street's estimates. Notably, revenue grew 265% year-on-year and 22% sequentially during the quarter. The strong topline performance was mostly driven by the data center segment, which was up 409% year-over-year and 27% sequentially as demand for Nvidia processors optimized for generative AI, LLMs (large language models), and other AI workloads continued to accelerate. The company estimated that roughly 40% of Data Center revenue was driven by AI-related applications. Guidance for the next quarter was also good, with revenue, gross margin, and implied operating profit coming in ahead of expectations.
Overall, Nvidia's strong performance during the quarter highlighted the growing demand for AI-related technology and demonstrated the abundant growth opportunity for innovators within the space.
AMD is up 30.8% since the beginning of the year, but at $181.04 per share it is still trading 14.4% below its 52-week high of $211.38 from March 2024. Investors who bought $1,000 worth of AMD's shares 5 years ago would now be looking at an investment worth $6,970.
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