AMD's New AI Chips Just Got a Huge Vote of Confidence From Sam Altman
OpenAI CEO Sam Altman is excited about their potential, referring to them as "amazing."
AMD's growth rate has been accelerating in recent quarters and much more growth could still be on the way.
10 stocks we like better than Advanced Micro Devices ›
You can see it from the stock price: Not a lot of people are taking Advanced Micro Devices (NASDAQ: AMD) seriously right now as a competitor to its much larger rival, Nvidia. Even though many stocks involved in artificial intelligence (AI) have been hot buys, Advanced Micro Devices, also known as AMD, has been lagging behind.
Over the past 12 months, shares of AMD are down 20%, while Nvidia's have risen by around 14% (as of June 23). And if you stretch out the time frame even further, the difference becomes wider.
AMD was a bit late in launching AI accelerators, but it may finally be closing the hardware performance gap and possibly even catching up to Nvidia. It recently announced its latest AI chips, and one person who is excited about them is none other than OpenAI CEO Sam Altman.
AMD CEO Lisa Su unveiled the Instinct MI400 line of chips a few weeks ago. They'll start shipping to customers next year. The chips can be tied together in a rack solution called "Helios," which Su says "functions like a single, massive compute engine." OpenAI, the company behind ChatGPT, will use the new chips, and Altman is excited about their potential. "It's gonna be an amazing thing."
The hope at AMD is that these new chips will take some market share from Nvidia, which has been far and away the leading AI chipmaker in the market thus far. With the MI400s earning a favorable endorsement from Altman, and considering AMD's plans to price them aggressively, faster growth could be ahead for the chipmaker.
In recent quarters, AMD's results have been looking better and its growth rate has started to accelerate again.
If its growth rate can remain strong, that could attract the types of AI investors who are specifically seeking out riskier stocks with lots of upside potential. AMD's valuation of $210 billion is just a fraction of Nvidia's $3.5 billion market cap. But while Nvidia has been a beast in the AI sphere, investors today may be wondering just how much higher it can go given that it's already among the three most valuable companies in the world. This is where AMD may be a more compelling option.
However, for AMD to win over investors, it will need to not only grow its sales but its bottom line as well; currently, the stock trades at more than 90 times its trailing earnings, and even its forward earnings multiple (based on analysts' consensus estimates) is 34, which is still a bit high. The S&P 500's forward price-to-earnings ratio is 23.
Setting prices for its AI chips at aggressively low levels could help them win market share, but it may also hurt AMD's margins, which is why it will be imperative for investors to pay close attention to AMD's gross margins to see if they are declining as it rolls out its newest chips.
Shares of AMD have been rallying over the past few months, and the business has a lot of potential to rise in value over the years. By working closely with Altman and the OpenAI team, and gaining feedback on its chips, AMD can ensure that its products meet the needs of key customers and hyperscalers.
AMD looks like a good stock to buy right now as its growth rate has been improving, and the best may still be to come as it starts rolling out its Instinct MI400 chips. Although its margins may take a hit in the near term, proving that its chips can be formidable alternatives to Nvidia's chips will arguably be much more important to AMD in the long run.
Before you buy stock in Advanced Micro Devices, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Advanced Micro Devices wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $689,813!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $906,556!*
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*Stock Advisor returns as of June 23, 2025
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
AMD's New AI Chips Just Got a Huge Vote of Confidence From Sam Altman was originally published by The Motley Fool
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