AMD Nears 10% Data Center GPU Share In Less Than 3 Quarters Post MI300 Launch

Summary:

• Advanced Micro Devices, Inc. is rapidly gaining market share in data center GPUs, outpacing Nvidia’s growth significantly.
• AMD’s MI300 ramp has led to impressive market share gains, with potential for further growth as more hyperscalers and enterprises adopt the technology.
• The rapid erosion of Nvidia’s market share by AMD in the data center GPU market is not being fully appreciated by investors and analysts.

Advanced Micro Devices, Inc. (NASDAQ:AMD) has been making steady progress in the AI hardware world for a while now with strong products. However, when investors read or hear about Nvidia (NVDA) on most financial platforms, they see unending talk about Nvidia data center GPU moat. Typically, the conversation centers around CUDA and more recently about “full stack” systems solutions. We have consistently argued that this talk has little merit, and Nvidia’s moat is far shallower than it appears.

This argument in the past has been theoretical and mostly about how competitors like AMD will perform with their emerging alternatives. But now, as this article shows, the early rounds of results are in. As we show in this article, AMD is taking market share from Nvidia at a far faster pace than even the most ardent AMD boosters have imagined. AMD market share gains are compelling evidence that Nvidia’s moat is shallow, as we have long maintained.

When AMD announced its Q2 results last week, unsurprisingly, the market was focused on GPU revenues and the full-year data center GPU guidance. On the crucial MI300 ramp, AMD delivered over $1 billion in revenues in Q2. Contrary to the recent concerns about Microsoft (MSFT) reducing orders, management noted that Microsoft expanded their use of MI300X to power GPT-4 Turbo and multiple copilot services, including Microsoft 365 Chat, Word, and Teams. As was expected and now well known, AMD raised GPU guidance from $4+ billion to $4.5+ billion.

While the $4.5B+ number is very strong and about a 10-fold increase from 2023 levels, many investors and analysts were disappointed. The reason is that most investors and analysts saw $4.5 billion as being only a tiny fraction of the rival Nvidia’s GPU revenues. But this assessment completely misses the big picture on data center GPU share progression.

It is not uncommon for analysts (even some very influential ones) and investors to comment that even if AMD increases 2024 GPU guidance to $5B, AMD’s GPU forecast pales in comparison to Nvidia’s likely $100B Data Center revenues. While those numbers are legit, the interpretation is missing the far more important point. AMD GPU revenues are growing far more rapidly than Nvidia’s, i.e., AMD is rapidly gaining share.

Consider that, based on management commentary, AMD MI300 revenues grew from $400M+ in Q4 to $600M+ in Q1 to $1B+ in Q2. These numbers represent staggering 50% and 66% sequential quarterly growth during the last two quarters. While Nvidia’s absolute numbers are much larger, the growth is nowhere near this. In other words, AMD is rapidly gaining revenue share against Nvidia. When one looks at the market share ramp, we can see that AMD’s MI300 ramp is being underappreciated by the market.

The following table takes Nvidia disclosed data center numbers and interpolates them to calendar quarter numbers, subtracts estimated networking and software components, and estimates Nvidia DC GPU revenues on a calendar basis. For forward revenue estimates, Nvidia is assumed to beat guidance by $2B in the Q2, but growth is forecasted to tail off a bit towards the end of the year due to Blackwell delays. AMD is assumed to deliver $5B in revenues for 2024. Note that $5B is in line with most street expectations, and we are not modeling AMD to gain materially from Blackwell delays.

What we see in the image above is that AMD started off its MI300 ramp with a bang, taking 4% market share in the very first quarter of shipments and reached 7% unit market share in the recently concluded Q2. In other words, AMD, from a standing start, has been able to get to a greater than 6% revenue market share in less than 3 quarters! That is a very rapid market share gain.

Unit share is growing faster than revenue share. If we adjust for the ASP discrepancy between Nvidia H100 and AMD MI300, it seems likely that AMD had over 9% unit share in Q2. The company is approaching 10% unit market share in less than 3 full quarters! There is probably no sell or buy side analyst that estimated that AMD will get to nearly 10% market share in less than 3 quarters.

What we are witnessing is a very rapid erosion of Nvidia market share by AMD. Very few investors and analysts seem to have caught on to this dynamic, and Nvidia’s moat is being destroyed at a rate the market does not appreciate.

Contrast AMD’s DC GPU market share gains with AMD’s DC CPU market share.

As can be seen from the image above, with EPYC, it took AMD 13 quarters to reach a 10% market share against Intel (INTC) Xeon. We can safely say that Intel had a moat far, far stronger than anything Nvidia seems to have.

Note that AMD has been able to get to 10% DC GPU market share with just three major customers: Microsoft (MSFT), Meta (META), and Oracle (ORCL). Microsoft was the first large hyperscaler to make public MI300X instances available in Q2 and has driven a substantial part of the revenues. Most of AMD’s MI300 revenues to date have come from the above 3 hyperscalers.

As fast as the MI300 ramp has been with hyperscalers, in enterprise, AMD has been hampered by a lagging software ecosystem. AMD has moved strongly to resolve this problem. To strengthen the software and support ecosystem, AMD acquired Silo AI, Mipsology, and Nod.ai, and invested over $125 million across a dozen AI companies in the past 12 months. Management noted that Hugging Face was one of the first customers to adopt the new Azure instances, enabling enterprise and AI customers to deploy hundreds of thousands of models on MI300X GPUs with one click. As its software matures, AMD is starting to accumulate design wins. Enterprise vendors like Dell (DELL), HP (HPE), and Lenovo (OTCPK:LNVGY) have adopted MI300 and the enterprise ramp is expected to begin in earnest in H2.

During AMD’s Q2 earnings call, Lisa Su noted that there was a large pipeline of customers currently evaluating MI300:

“MI300 enterprise and cloud AI customer pipeline grew in Q2, and multiple hyperscale and Tier 2 cloud providers are on track to launch MI300 instances in Q3.”

Note the emphasis on “multiple hyperscale” customers. For a company that currently has only three hyperscaler design wins, “multiple hyperscalers” launching instances in Q3 is huge news that many investors and analysts do not seem to understand the significance of. As a result of these design wins, we are forecasting that AMD will end 2024 with greater than 10% revenue share and greater than 12% unit share.

Wrap Up

AMD is gaining data center GPU share much faster than the market realizes – over 4 times as fast as AMD gained server CPU market share against Intel. And we know what happened to Intel over the last few years as AMD gained share. Nvidia investors better watch out!

Investors and analysts modeling AMD at 10% market share by the end of 2025 are dead wrong. At the current adoption rate, and with more hyperscalers adopting MI300 and enterprises set to ramp, AMD could easily ramp MI300 to twice that level. Given the rapid market share gains, and huge AI hardware total addressable market, AMD is a strong buy.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMD,MSFT,META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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