NVIDIA's Q2 results signal a lasting AI boom, impacting AMD's stock despite strong Q2 results.

AMD's stock hasn't rallied despite strong Q2 results, but Nvidia's encouraging results signal a lasting AI boom. The Chinese market remains unresolved, but AI chip demand is expected to continue.

Advanced Micro Devices, Inc. (NASDAQ: AMD) has not seen its stock rally despite reporting strong Q2 results, with revenues growing 32% to reach a record $7.7 billion. This lack of movement comes despite encouraging results from Nvidia (NVDA), which hint at a lasting AI boom. The Chinese market remains unresolved, but AI chip demand is expected to continue unabated.

AMD's Q2 results were bolstered by the introduction of its MI355 AI chip, which offers a 35x performance leap in ultra-low latency inference. This shift in the AI market from training to inference is expected to drive significant growth. Brookfield forecasts that inference chip sales will quickly match the demand from AI training chips, with power demand approaching the levels of training by 2028 and total AI chip demand growing 10x by 2034 [1].

Nvidia, the AI chip leader, reported FQ2 sales of $46 billion and guided to $54 billion in the current quarter. The company's CEO, Jensen Huang, suggested that the China market could be worth $50 billion this year, growing at a 50% clip annually. This, combined with the broader AI market growth, suggests substantial upside potential for both AMD and Nvidia [1].

While AMD is forecast to grow at a minimal 21% next year, the AI inference opportunity is significantly larger. The company is expected to end 2025 with AI chip sales at an $8+ billion annual rate, with a potential for $13 billion in AI GPU sales to reach the $40 billion target. AMD's stock, trading at 27x the official 2026 EPS target, has dipped back to $160, offering potential upside as the AI market expands [1].

The key investor takeaway is that AMD continues to see the opportunity expand while its AI GPUs become more competitive. The stock could easily fall to below $150, but remains cheap at the current price given the expanding AI opportunity [1].

References:
[1] https://seekingalpha.com/article/4818667-amd-nvidia-signals-lasting-ai-boom