AMD's AI Ambition: Near-Term Stumbles or Path to Dominance?

AMD's push into the AI chip market has sparked both optimism and skepticism among analysts, creating a stark divide between its long-term potential and near-term execution hurdles. While Piper Sandler envisions a “snapback” in GPU sales by late 2025, Bernstein and Morgan Stanley warn that AMD's MI350 adoption lags and China-related risks could delay its ascent to the $500 billion AI accelerator market by . This article explores whether AMD's bold bets on the Helios rack system and MI400/MI500 roadmap can overcome current headwinds and position it as a leader in AI inference.

The Near-Term Struggle: MI350 Adoption and China Headwinds

AMD's current quarter (Q2 2025) faces two critical challenges: delayed MI350 adoption and lingering export restrictions to China.

• MI350's “Year-Late” Launch: Bernstein analysts note that while the MI350 closes the performance gap with NVIDIA's Blackwell chip, its delayed launch means AMD has already ceded market share to competitors. “The inference market is moving fast, and AMD is playing catch-up,” one analyst remarked. Morgan Stanley concurs, arguing that the MI350's limited traction means AMD may not meaningfully grow its revenue from its largest customers until the MI400 series arrives in 2026.

• China-Related Revenue Hits: New U.S. export controls have cost AMD an estimated $1.5 billion in annual revenue, with $800 million in charges still unresolved. Piper Sandler expects these to clear by late 2025, but Bernstein warns that geopolitical tensions could prolong the pain.

The Long-Term Play: Helios and MI400's Market-Redefining Potential

AMD's true catalyst lies in its Helios rack system and the MI400/MI500 roadmap, which analysts argue could shift the AI chip landscape.

• Helios: The Game-Changer: The Helios rack combines thousands of MI400 GPUs into a single architecture, enabling exascale performance for large language models and advanced AI workloads. Piper Sandler calls this “pivotal for AMD's Instinct growth,” noting that it directly competes with NVIDIA's GB200 rack systems. Microsoft's $1 billion cloud investment in AMD and partnerships with OpenAI and Meta underscore its ecosystem momentum.

• MI400: The Inflection Point: Morgan Stanley acknowledges that the MI400 series (2026–2027) could finally give AMD a “fair fight” against NVIDIA. The chip's raw performance and integration with the Helios system could drive adoption in hyperscale data centers, where NVIDIA currently dominates. Piper Sandler estimates AMD's AI revenue could hit $1 billion by 2026, scaling to $500 billion by 2028 as it captures a larger share of the inference market.

Risks vs. Rewards: Why the Long View Matters

Risks:
- Execution Delays: Scaling MI400 production and securing export approvals are binary risks. A misstep could delay the revenue ramp.
- NVIDIA's Counterattacks: NVIDIA's price cuts or new chips could squeeze AMD's margins.
- Macroeconomic Downturn: A recession could reduce data center spending, hitting both AMD and NVIDIA.

Upside:
- TAM Expansion: AMD's open-source ROCm software ecosystem and deeper ties with cloud providers like AWS (a pending partner) give it a cost advantage over NVIDIA.
- AI Inference Surge: The inference market is growing faster than training, and AMD's focus here aligns with trends.

Investment Thesis: A High-Risk, High-Reward Bet for Long-Term Investors

While Bernstein and Morgan Stanley remain cautious on near-term upside, Piper Sandler's $140 price target (implying 16% upside) and a 2028 TAM of $500 billion suggest AMD's stock is undervalued relative to its ambitions.

Recommendation:
- Buy AMD if you have a 3+ year horizon. The stock's volatility (beta of 1.99) demands patience, but the MI400/Helios duo could make AMD a leader in AI inference.
- Entry Points: Target dips below $120–$130, with stops below $110 to manage risk.

Conclusion: AMD's Future is Binary, but the Prize is Massive

AMD's path to the $500 billion AI market hinges on executing its MI400 roadmap and resolving China's export challenges. For now, the skeptics are right—the company faces steep near-term hurdles. But for investors willing to bet on its vision, AMD's ability to scale its open-source ecosystem and compete rack-to-rack with NVIDIA could deliver outsized returns. As Piper Sandler's analysts note: “The snapback in AMD's GPU business isn't just possible—it's inevitable.”

The question is whether you're willing to wait long enough to see it.