Jim Cramer attributes AMD's recent performance to AI-related chips and its potential to catch up with NVIDIA.

Advanced Micro Devices (AMD) shares have risen 49% YTD due to growing optimism in the AI chip market. Analysts believe AMD can catch up with NVIDIA and gain market share with its AI accelerators. CEO Lisa Su has shown potential to take the stock higher. While AMD has had a significant run, some AI stocks may hold greater promise for higher returns and have limited downside risk.

Title: Advanced Micro Devices (AMD) Shares Rise Amid AI Chip Market Optimism

Advanced Micro Devices (AMD) has seen its shares rise by 49% year-to-date (YTD), fueled by growing optimism in the AI chip market. The company's stock performance has been driven by expectations that AMD can catch up with NVIDIA and gain market share with its AI accelerators. CEO Lisa Su has been instrumental in driving this optimism, with analysts predicting that she could take the stock even higher.

On July 28, AMD's stock jumped about 3.5% after the company announced plans to boost the price of its Instinct MI350 AI accelerator from $15,000 to $25,000, a significant 67% increase [1]. This price hike is seen as a testament to robust demand for AMD's AI gear and could translate into substantial revenue growth in the company's next quarterly report. Wells Fargo analysts, led by Aaron Rakers, reaffirmed their bullish stance on AMD, citing the recent launch of the MI355X GPUs as a key factor in the company's second-quarter momentum [1].

Looking ahead, Rakers forecasts roughly $1.65 billion in data center GPU sales in fiscal Q3 2025, representing modest year-on-year growth. This outlook already factors in an $800 million drag from export limits on MI308X shipments to China, pending license renewals. If these restrictions are lifted, AMD could see additional upside in its back half [1].

AMD's bid for a larger slice of the $500 billion AI compute pie is also bolstered by CEO Lisa Su's projections. She has predicted that AI chip demand could soar to more than $500 billion within a couple of years, driven by surging infrastructure needs from companies like Elon Musk's xAI and Sam Altman's OpenAI [2]. Su emphasized the need for rapid scaling in both chip design and manufacturing, with the U.S. playing a significant role in this growth.

However, some AI stocks may hold greater promise for higher returns and have limited downside risk. While AMD has had a significant run, investors should remain cautious and consider other AI-focused companies that could offer better growth potential.

References

[1] https://finance.yahoo.com/news/amd-stock-jumps-ai-chip-184602059.html
[2] https://www.benzinga.com/markets/tech/25/07/46594910/lisa-su-says-ai-chip-demand-could-top-500-billion-in-just-a-few-years-says-us-must-rapidly-scale-manufacturing-to-keep-up-with-elon-musk-sam-altman