Advanced Micro Devices (AMD) strikes the door of Nvidia (NVDA). Last week, the courageous semiconductor Challenger has announced the completion of its acquisition of $ 4.9 billion in ZT systems for its expertise in systems and the design at rack level. The objective is to accelerate the design and deployment of the powered DMLA IA infrastructure. This market is currently dominated by Nvidia and is expected to exceed 1 dollar billion in a few years. Although the acquisition takes advantage of the existing DMLA forces and represents a tremendous growth opportunity, it is accompanied by challenges that make me carefully neutral on the stock in difficulty.
Advanced Micro Devices (AMD) Price History in the past 3 years
The NVIDIA GPUs have gone from the feeding of video games to the formation of large AI models. Since then, Nvidia has gone from a modest manufacturer of graphic chips to one of the most precious companies in the world. AMD wants to imitate the development of NVDA and accelerate its plans.
Before the acquisition of ZT Systems, the company was a significant success in the processor market in the data center. Revenues from the AMD data centers segment reached a record of $ 3.9 billion in the fourth quarter of 2024, which represents a growth of 69% in annual shift. It was partly thanks to a good start of AMD Instinct GPU. For the whole year 2024, AMD said that it had delivered “more than $ 5 billion” in revenue from its IA instinctively accelerators, which now represent a large part of the income.
Advanced Micro Devices (AMD) Income, Gains and Profit Margin History
During his last profit call In February, the company highlighted significant performance gains and the interest of customers in its current MI300 series. He accelerated the production calendar for its new generation MI350 AI chips in mid-201. These results were contrasting with a sharp drop in AMD games (-59% from one year to the next) and integrated segments (-13% in annual sliding) during the same period due to the opposite winds such as inventory adjustments, slower and sale demand.
Advanced Micro Devices (AMD) estimated and reported the profits history
By acquiring ZT Systems, AMD can offer end -to -end solutions combining its CPUs, GPUs, networking components and software such as ROCM. The latter is positioned as an open source alternative to the Cuda ecosystem of Nvidia. So this could have a call to customers who seek flexibility and personalization.
In addition, the existing relationships of ZT Systems with the main cloud suppliers such as AWS and Microsoft Azure give credibility to AMD offers. ZT systems clearly had in -depth expertise in the construction of systems that hyperscalers want. Recognizing ZT Systems’s key staff will join AMD to help the transition. If everything is going well, customers could have a serious alternative to Nvidia, mainly if AMD can compete in price and performance.
However, there are many risks to the AMD strategy. To start, the Cuda software platform widely adopted and rooted from Nvidia has the advantage of the developer’s familiarity and a vast ecosystem of optimized tools. To convince the developers of having abandoned the constituent elements of their programs for the new ROCM platform of AMD is a massive demand. In addition, it is not a two horsepower race. Intel (with Gaudi accelerators) and other flea startups have well funded for market share. Finally, the integration of ZT systems gently is only the beginning. Beyond the substantial financial and engineering resources to launch its plans, AMD will have to keep up with the pace of Nvidia’s performance and include the roadmap to gain ground. This will surely require impeccable execution and supported investments.
At Wall Street, AMD Stock has a moderate purchase consensus note based on 23 Buy, 13 Hold and Zero Sell Ratings in the last three months. AMD Average price target of $ 147.27 per share implies an increase of 66% in the next twelve months.
As the analyst points out, China represents almost a quarter of AMD’s income. In particular, American regulations specifically limit the sale of the most powerful compatible fleas to China without license. The rules are complex and subject to change, creating an uncertainty for future commercial perspectives of AMD in this region. This is particularly relevant as the continuous “price War ”between China and the United States has an impact on trade relations.
The AMD company in the AI data center space is delivered with its risks and advantages. Although the acquisition of ZT Systems AMD a viable competitor on this market, the Cuda Robust software ecosystem will be difficult to overcome, in particular without substantial initial investments that could put pressure on the margins and other parts of AMD activities. The comparison of all the giants of semiconductors side by side shows that Intc drags behind AMD while the two chase NVDA.
Comparison of performance between AMD, NVDA and Intc actions
Comparison of performance between AMD, NVDA and Intc actions
In addition, it is not only Nvidia with whom Amd is in competition. AMD also faces competition from other notable players like Intel. In particular, the American government, through American-Chinese export controls, can change the rules of the game at any time. However, the potential awards in this billion dollars market are immense, justifying a carefully neutral position on AMD.
