Investors Eye AMD's AI Strategy Amidst Rising Competition

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Advanced Micro Devices (AMD) is set to report its fourth-quarter earnings on February 3, 2025, with analysts closely scrutinizing its strategy in the burgeoning artificial intelligence (AI) sector. According to Ryuta Makino of Gabelli Funds, there are growing concerns regarding AMD's market position given the increasing trend of tech giants like Microsoft, Amazon, and Meta opting for custom silicon. Analysts anticipate a revenue increase of over 22% to approximately $7.53 billion for AMD in the December quarter, but competition from Nvidia remains a significant hurdle.

Nvidia currently dominates the AI chip market, supported by its proprietary software that has become a standard for developers. This competitive landscape poses challenges for AMD, which saw its stock decline by 18% in 2024, while other chipmakers like Broadcom and Marvell Technology enjoyed substantial gains. TD Cowen analysts forecast that AMD could achieve AI chip sales reaching $10 billion this year, significantly higher than the company's own $5 billion projection for 2024.

Concerns also persist about manufacturing capacities due to demand outpacing supply, complicating AMD's ability to capitalize on opportunities in the AI market.

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