Since practically the beginning of time, humanity has always been searching for the next big thing.
Whether it is entertainment, fashion or technology, a significant part of the population has one eye on the here and now and the other on the future.
Without visionaries, we wouldn't have cars, airplanes, or the Internet.
Of course, forecasters don't always hit the mark. Remember the Segway or the hoverboard, two mechanized wonders that were supposed to change life as we know it?
Things didn't turn out that way, but that didn't stop the search for the next innovation.
artificial intelligence has generated all kinds of buzz, especially after OpenAI launched ChatGPT, a large language model that millions of people now use to search, analyze and create content.
“The arrival of generative ai heralds disruption and opportunity across industries,” Deloitte said in ai-report.pdf”>a report
ai has been a boon to technology companies that serve enterprise and hyperscale networks that businesses and governments use to train and run ai applications, including advanced microdevices.
AMD shares have soared on the potential to gain significant share of the ai chip market this year. The rally did not surprise Gus Richard of Northland Capital. He recommended buying Advanced Micro Devices last July before its shares rose 47%.
ai Exuberance Drives New Rating Ahead of Earnings
ai chips power everything from generative platforms like ChatGPT to the most advanced supercomputers used by Google. (GOOGLE) – Get a free report and tesla (TSLA) – Get a free report.
Advanced Micro Devices (amd) – Get a free report is making its presence felt in the ai sector, and some believe the Santa Clara, California-based company could challenge Nvidia. (NVDA) – Get a free report for ai chip dominance this year.
Related: ai Stock Soars With New Guidance (It's Not Nvidia!)
This year, AMD, founded in 1969 by Jerry Sanders and seven other technology professionals, is set to launch the MI300, next-generation chips that will challenge Nvidia for ai chip dominance.
And, in the more immediate future, AMD is scheduled to report its fourth quarter results on January 30.
Last year, the company posted earnings of 69 cents per share, while analysts expected 67 cents per share. Revenue amounted to $5.6 billion, above Wall Street forecasts.
Wall Street analysts have responded favorably to AMD in recent weeks. Cantor Fitzgerald recently initiated AMD with an Overweight rating and a $190 price target. Earlier this month, analysts at TD Cowen raised their price target for AMD to $185 from $130 per share, while maintaining an Outperform rating on the stock.
Wall Street expects fourth-quarter revenue and earnings per share to be $6.1 billion and 67 cents per share, respectively. If it meets those estimates, it will mark the fastest sales growth in a year.
Still, Northland Capital isn't all that impressed with ai's profit potential.
Richard downgraded AMD to market perform from outperform this week, saying in a research note that chip growth expectations have turned into “irrational exuberance,” according to CNBC.
“It's really big, but not as big as investors think,” Richard said of ai. “While chip prices are cyclically driven by supply and demand, they remain stable over the long term. We also believe that ai demand in 23rd year was overstated due to double ordering.”
Is artificial intelligence the 'technology of the moment'?
Northland called for industry-wide ai chip revenues of $125 billion in 2027. Richard expects AMD to take 13% market share. Including ai chip sales, he predicts AMD's total sales will be $45 billion that year.
The bad news? Richard said he believes AMD stock reflects much higher ai revenues in 2027 than he forecast.
With AMD stock $6 above the company's previous price target and significantly above its July 5 update ahead of Nvida's spectacular quarter, ai-not-as-big-as-investors-are-thinking-432SI-3279739″>Invest.com As reported by Northland, it decided to lower the rating of its shares.
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The analyst said the growth of the ai chip market in 2023 was driven by factors such as the popularity of ChatGPT, price increases, double orders and stockpiling by Chinese companies.
Richard also said that market leader Nvidia was effectively a “single source” for ai chips, and that demand has outstripped supply. Nvidia recently launched a new H200 ai chip and said it plans to soon launch a new specially designed chip for sale in China.
As a result, Nvidia and AMD are likely to invest heavily to compete with each other. For now, the market seems large enough to support both players. However, as the Deloitte report notes, the trajectory of ai is uncertain in the long term.
The report asks: “Will generative ai be the largest and most impactful technological innovation in history?” Will it completely transform the way humans live and work? “Or will it turn out to be just another technology of the day That promised revolutionary change but ultimately produced only incremental improvement? “At this point we can't be sure.”
That uncertainty is too much for Northland to maintain its buy rating.
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