NVIDIA’s $2 Million A.I Chip Eats Into AMD’s Microsoft A.I. Pie Worries Research Firm

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With the first quarter of 2024 over, analysts and research firms are out with their reports for the state of the semiconductor supply chain. The year has been marked with artificial intelligence dominating the conversation, and research reports from Keybanc and UBS are optimistic about the demand for A.I. products.

In its analysis, Keybanc shares that NVIDIA remains the industry’s preferred A.I. provider, but higher prices have made its customers, such as Microsoft, shift their forecast to allocate more funds to the firm’s products at the expense of its rival firms. UBS believes that the six biggest technology firms in terms of market value should generate close to half a trillion dollars in cash flow this year, keeping their valuations lofty and at high free cash flow multiples.

AMD Might Bring In $1 Billion In A.I. Revenue During Q1 2024 Says Keybanc

With the first quarter now over, all attention is focused on the earnings season for technology names such as Microsoft, NVIDIA and AMD. These firms are key players in the A.I. industry, with the software segment in the industry made of firms like Microsoft and Facebook parent Meta accounting for the demand portion of the market and chip designers and manufacturers like Intel, NVIDIA and AMD accounting for the supply portion.

This bifurcation is at the heart of Keybanc’s latest investment report, which covers the state of the A.I. market regarding AMD, NVIDIA, Microsoft and others. After running channel and supply chain checks, Keybanc believes that NVIDIA’s premier A.I. product, the GB200 Grace Blackwell Superchip is seeing strong industry interest and could generate anywhere between $90 billion and $140 billion in revenue. This is based on an expected price range of $1.5 million to $2 million, a beefy estimate that apparently eats up into AMD’s pie of the MI300X A.I. GPU Accelerator.

According to Keybanc, a demand supply mismatch in the A.I. sector, with demand outstripping supply, could spell into a billion dollars of revenue for AMD during the first quarter of 2024. It adds that the ramp up of the MI300X is going well, further solidifying the research firm’s belief that AMD is witnessing positive demand for its A.I. products.

However, the high price tag for NVIDIA’s Blackwell quoted above makes Keybanc worry about orders for AMD’s products. Its report suggests that the pricier products from NVIDIA have made Microsoft Corporation upgrade its forecasts for the MI300X and allocate more funds to NVIDIA’s products. Microsoft, along with Google parent Alphabet, is one of the premier players in the A.I. industry, particularly due to its tight integration with the firm behind ChatGPT, OpenAI.

UBS takes a broader look at the A.I. industry and points out that the global technology industry could grow its revenue by 18% annually in 2024. Within the industry, it outlines that the six largest technology firms, in terms of market value, can generate as much as $480 billion in free cash flow this year and grow this to $560 billion in 2025.

These free cash flows make the firm estimate that the big ticket technology names are trading at roughly 27 times their 2024 cash flow, which is still modest when compared to the 30x to 50x range in which global markets trade.

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