AMD a Safe Bet If AI Bubble Bursts?

After a long period of explosive growth, the artificial intelligence (AI) market may be starting to contract. AI chip manufacturer AMD is already starting to feel the pressure, with its stock prices recently falling by 18%. Traditional wisdom would state that now is the time to be cautious about buying into the company, but analysts aren’t so sure that this applies to AMD. The company may actually be well poised to withstand a burst in the AI bubble thanks to its unique position in the market.

AI Trend Overhyped?

AI has been dominating headlines in recent years. From automating routine work and household tasks to writing code and even predicting medical events such as a hypoglycemic attack, AI is already a part of everyday life. But it hasn’t become the end all be all that some predicted early on. As it turns out, artificial intelligence is no substitute for human wisdom and experience.

Training AI requires immense resources, including high-performance graphics processing units (GPUs). There are now concerns that due to a host of factors, from economic pressures to a softening of the AI hype, demand for those GPUs may be slowing. As a result, early indicators show that the AI bubble may be getting ready to burst.

By The Numbers

What does all this mean for AMD? It is true that the company’s stock has started to contract, but analysts say that it’s not likely to collapse. Part of this is a strong expectation for AMD’s next quarterly earnings release, which is coming up in May. But the bigger reason is that AMD is betting heavily on a hotly anticipated subsegment of the AI market: AI compatible PC chips. Its biggest competitor dominates the overall AI chip space, but AMD has a staggering 90% of the AI-PC market locked up. These PCs are expected to double in shipment over the next year, and then double again before 2028, leaving AMD in a highly enviable position. For this reason, analysts predict that the company will soon regain its rapid growth trajectory, potentially hitting $250 per share within the next year.

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