[News] AMD’s AI Strategy Tested as Big Tech Shifts to Custom Chips

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As AMD prepares to report its fourth-quarter results on February 4, according to a report from Reuters, investors have been closely monitoring the company’s AI chip strategy. This comes amid growing concerns over AMD’s position in the AI infrastructure race, as major tech firms increasingly shift toward custom chips.

The Rise of Custom Chips and AMD’s Competitive Challenges

As indicated by the report, AMD’s Q4 revenue is expected to grow by over 22% to USD 7.53 billion, while its net income for the same period is projected to rise by more than 61.4%, reaching USD 1.08 billion.

However, its growth potential remains overshadowed by NVIDIA’s dominance in the AI chip market and the rapidly growing movement of tech giants like Microsoft, Amazon, and Meta toward developing their own custom chips.

The report further indicates that these leading tech companies are intensifying their efforts to create custom chips designed to process the vast data requirements of GenAI, with each of them introducing new AI chip versions last year. This growing shift toward custom AI processors has also fueled the success of companies like Broadcom and Marvell Technology, both of which provide tailored AI processors to major hyperscalers.

As highlighted in the report, Broadcom’s stock more than doubled in value last year, while Marvell recorded an increase of approximately 83%. In contrast, AMD saw an 18% decline in 2024, underscoring the challenges it faces in the evolving AI chip market. Broadcom projects that AI could create a revenue opportunity of up to USD 90 billion by 2027, according to CEO Hock Tan, as noted in the report.

Despite the rapid growth in AI demand, the report points out that AMD faces significant barriers to expanding its market share, particularly due to the high costs major companies incur when switching chip suppliers. However, the ongoing push to develop advanced AI models may help mitigate concerns, as Big Tech continues to invest heavily in AI.

AMD’s Revenue Growth in Data Center and PC Segments

According to the report, AMD’s data center chip segment is expected to see substantial growth, with fourth-quarter revenue projected to surge nearly 82% to USD 4.15 billion, contributing to more than half of the company’s total sales, based on data compiled by LSEG.

Meanwhile, the report highlights that AMD’s personal computer unit is expected to grow by nearly 33% to $1.94 billion, steadily gaining market share from its competitor, Intel.

Read more

• [News] AMD Raises Full-year AI Chip Sales Projection to USD 5 Billion though Q4 Forecast Fails to Impress
• [News] AI Market: A Battleground for Tech Giants as Six Major Companies Develop AI Chips

(Photo credit: AMD)