As major tech companies pivot towards custom silicon, doubts arise regarding AMD's (AMD, Financial) position in the AI infrastructure race. Investors will closely analyze AMD's AI strategy as it releases its fourth-quarter earnings. Analysts predict a 22% revenue increase for AMD, reaching $7.53 billion, though its growth outlook is challenged by Nvidia's (NVDA) dominance in the AI chip market and tech giants like Microsoft (MSFT), Amazon (AMZN), and Meta (META) developing custom chips.
Custom silicon refers to chips tailored for specific clients, differing from off-the-shelf processors. Chinese AI startup DeepSeek demonstrates that low-cost models can rival Western competitors, raising concerns about high AI infrastructure expenses driving chipmaker stock prices.
Microsoft, Amazon, and Meta have heavily invested in developing chips for handling large datasets required by generative AI, boosting sales for Broadcom (AVGO) and Marvell Technology (MRVL), which provide custom AI processors for hyperscalers. Broadcom expects AI to present a $90 billion revenue opportunity by 2027. While Broadcom and Marvell's stocks surged last year, AMD fell 18% in 2024.
Despite Nvidia's market dominance, changing chip suppliers is costly, posing a challenge for AMD's market penetration. However, the drive for complex AI models might mitigate these concerns. Analysts anticipate AMD's AI chip sales to reach $10 billion this year, double its 2024 projection. AMD's data center chip division is expected to see an 82% revenue increase, representing over half of total sales.
