AMD turned in powerful 3rd quarter results, but the market punished AMD for not having a stronger outlook. AMD’s leadership has, of late, been very conservative in its outlook and often beat the projections, as it did significantly in this case with actual sales performance. Costs have risen for the company as it pivots sharply toward the current AI opportunity. As a result, costs also exceeded expectations.
This is a company in transition, not because of any prior mismanagement, but because the sudden ramp to AI caught nearly everyone by surprise, and it takes a while to pivot a major technology company like AMD. Still, it has become number two to NVIDIA’s massive and well executed AI ramp, and it has a number of unique advantages as the AI market emerges from a bubble that might not turn out to be a bubble.
AMD’s Bright AI Future
AMD has a number of advantages as we move into the age of AI. One of the biggest is that, unlike some of its peers, it subordinates itself to its customers. In other words, rather than telling customers what the customers must buy, AMD explores what the customer needs and often creates unique solutions mapped to the customer.
This will become increasingly critical to AI deployments as customers become more familiar with a rapidly emerging and customized set of AI engines. AMD’s acquisition of Silo AI, which has one of the largest pools of AI practitioners in any one company, will help assure this outcome.
You see, if you specialize in creating custom solutions, it doesn’t do you much good if your customers don’t understand what they need and want because the related technology is too young. Silo AI has the core experience to help define the hardware that not only is needed today but will be needed as AI evolves and becomes more widely used. Thus, the acquisition of Silo AI is a foundational element to AMD’s continued AI success. It’s a brilliant and largely unmatched move by both companies’ executives.
In addition, AMD was created to be a fast follower first of Intel and now, most recently, of NVIDIA. This has allowed AMD to be far more agile than its peers. It can’t sit back and relax with a significant market share advantage. It has to be able to pivot on a dime. While AMD has often struggled under prior management to do those pivots timely and effectively, current management is an execution machine which has allowed AMD to move far more quickly than anyone but NVIDIA (which helped create the AI wave in the first place) to take the number 2 GPU and AI slot behind NVIDIA.
As AI advances, more and more companies will be looking at having multiple vendors for AI solutions due to an expanding problem surrounding product shortages and mis-matched inventories that have emerged as AI has rolled to market. AMD has become the preferred secondary vendor because buyers are so used to it playing this role with Intel and, more recently, NVIDIA.
Wrapping Up:
While the stock market may be somewhat disappointed with AMD’s costs and outlook, these are both signs of AMD’s conservative nature and its ability to pull out all the stops to address a changing market. As we move to AI, no market has ever changed as fast as the technology market is doing, and it is pushing AMD’s unique fast pivot skills to the maximum.
However, AMD’s financial results and product launches again showcase that this is a company designed to weather this kind of storm better than any other in its class. The firm appears poised to capture a significant portion of the massive emerging AI market which, while on a bit of a bubble, is moving so fast that when that bubble pops there is a good chance the real market underneath it will make that pop a non-event.
AI is coming like a freight train, and AMD is one of the few companies with a first-class ticket to ride.
