AMD is under heavy pressure to defend its stock-market valuation.
Advanced Micro Devices has the potential to build upon its 2024 achievements and profit from new opportunities. The company's growth in 2025 could even outpace its rivals - if substantial internal and external challenges can be overcome.
AMD made an impression on the market in 2024. The company's revenue reached $6.8 billion in the third quarter, an 18% increase year-over-year. This growth was largely driven by record data center revenue of $3.5 billion, a stunning 122% increase from the same period in the previous year, fueled by strong sales of AMD's Instinct GPUs and EPYC CPUs.
In the client CPU market, AMD Ryzen processors continued to gain traction. The company captured 23.9% of the desktop CPU market share in the first-quarter of 2024 - the largest gain over rival Intel since 2016.
Growth drivers
AMD’s biggest opportunity for success in 2025 will be in data center GPU expansion, specifically improvement in its ROCm software stack for its GPUs in the data center — AMD’s competitor to NVIDIA’s CUDA. The market has quickly learned that hardware specs are only part of the story, and the investment in optimized software to enable performant GPU compute with standard libraries is even more critical. AMD hopes that lowering barriers for developers, will enable AMD to challenge Nvidia’s dominance in the AI sector.
AMD has one thing going for it that can't be undervalued: its customers want it to be successful. I have talked to many potential customers of the MI300X parts, from cloud providers to enterprises to software developers, and all of them want to see AMD make an impact in the market. For these customers, a strong second competitor means better pricing, more availability, and a better overall ecosystem.
Continued growth in data center CPUs will also be part of the growth story. AMD's EPYC series has established a reputation for reliability and performance with consistent execution and stable platforms. AMD has seen significant growth in being a viable alternative to Intel in this area; notably, major clients like Meta Platforms, Inc. have adopted EPYC processors, validating their total cost of ownership and performance benefits. AMD currently has more than 50% of the major cloud-server providers market share, which I expect will influence broader market adoption for both enterprise and tier-2 cloud customers.
Client CPU market growth is yet another growth driver for AMD. Its Ryzen product is poised for further market-share expansion, continuing to secure design wins with leading OEMs including Dell Technologies Inc., HP Inc, and Lenovo Group (HK:992). This success will extend AMD's presence across a wider range of systems within these brands. AMD might make significant inroads into the commercial sector, a sizeable market that has been a challenge for the company
The emergence of AI-capable PCs and platforms like Microsoft's Copilot+ could drive an upgrade cycle among users. AMD's Ryzen AI processors are positioned to deliver superior performance in these applications. In the third-quarter of 2024, AI-capable PC shipments accounted for 20% of the market, indicating a growing trend that AMD is well-equipped to leverage.
Obstacles to success
Despite these prospects, AMD faces notable challenges:
-- Data center competition: Nvidia's established dominance and software ecosystem present significant hurdles. AMD CEO Lisa Su's strategic initiatives will be crucial in addressing these issues to gain substantial market share. Without a dramatic change in 2025 on the software and infrastructure around MI300X, uptake and acceptance of the follow-on GPUs will remain limited. It is also possible that Intel is finally able to revitalize its Xeon family of CPUs for the data center and can force a momentum shift of its own away from AMD EPYC CPUs.
-- AI PC adoption: The success of AI-integrated PCs depends on user- and IT department acceptance. Can an AI-enabled PC make a consumer's life better or easier? If platforms like the Microsoft Windows Copilot+ segment fail to resonate and thus are unable to create demand for a more aggressive PC upgrade cycle, AMD's growth in the PC segment could be limited. Couple that with strong competition from Intel with its Core Ultra family of processors and the possibility that Qualcomm QCOM Snapdragon chips take AMD's place.
Still, AMD's trajectory in 2025 appears promising, with opportunities to expand its influence across data center and client markets. By capitalizing on its recent successes and navigating these described challenges, AMD is well-positioned to make 2025 a landmark year. AMD is under heavy pressure to defend its stock-market valuation, and its ability to scale its data center GPU business will be the most critical determining factor of investor confidence.
This article is part of a series where tech-company analyst Ryan Shrout evaluates tech-industry leaders' prospects for 2025. Some of this commentary is based on assumptions of product execution, market adjustment and competitive displacement. It is not a comprehensive analysis of a full-year outlook.
Ryan Shrout is president of Signal65 and founder at Shrout Research. Follow him on X @ryanshrout. Shrout has provided consulting services for AMD, Qualcomm, Intel, Arm Holdings, Micron Technology, Nvidia and others. Ryan holds shares of Intel.
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