Over the past couple of years investors haven’t been able to buy semiconductor stocks fast enough. A big reason for this is because sophisticated chips known as graphics processing units (GPUs) are one of the core power sources of artificial intelligence (AI) applications such as machine learning and even autonomous driving.
As the AI narrative continues to push the markets higher, chip stocks will likely remain in high demand. As it stands today, Nvidia is widely considered to be the market leader among AI-powered chip companies. However, Nvidia just told investors that the company’s new Blackwell series GPUs are going to be delayed due to a design flaw.
While I’m no supporter of schadenfreude, I see this setback at Nvidia as a once-in-a-lifetime moment for the company’s biggest competitor, Advanced Micro Devices (NASDAQ: AMD). Let’s examine the full situation at hand and assess how AMD could take advantage of Nvidia’s hiccup.
A tale of two chip companies
The charts below illustrate a number of important financial metrics for Nvidia and AMD.
On one side of the equation, Nvidia’s sales and profits are consistently soaring — leading to an increasingly steeper slope among the colored lines depicted below. Yet on the other side, Nvidia’s chief rival is demonstrating noticeable inconsistencies in its operation.
NVDA Revenue (Quarterly) Chart
The dynamics illustrated above clearly indicate that chip buyers not only prefer Nvidia, but are also willing to pay top dollar. Although Nvidia has remained the supreme semiconductor company since the inception of the AI revolution, AMD has an incredible opportunity to leapfrog Nvidia right now.
Why this might be AMD’s defining moment
Wall Street analysts estimate that Nvidia has nearly 80% of the AI-powered chip market. While AMD has done what it can to compete with Nvidia’s stunning pace of innovation, I think the company has largely attempted to distract investors from Nvidia’s overwhelming lead through a series of questionable acquisitions.
To me, AMD’s time is close to running out and it can’t afford to rely on acquisitions as a…
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