2024.05.19 12:38
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Microsoft delivers an AI blow to Nvidia

Microsoft plans to offer its cloud computing customers a platform of Advanced Micro Device (AMD) artificial intelligence chips to compete with Nvidia. The company will also launch a preview of new Cobalt 100 custom processors. Microsoft's clusters of AMD's flagship MI300X AI chips will be sold through its Azure cloud computing service, giving customers an alternative to Nvidia's H100 family of powerful GPUs. AMD's chips are considered the most cost-effective option for Azure OpenAI.

Back in 2011, Microsoft (MSFT) offered developers a tour of the future.

The software giant was holding its first Build conference, which the Redmond, Wash.-based company described as "a new event that shows modern hardware and software developers how to take advantage of the future of Windows."

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"Learn how to work with the all new touch-centric user experience to create fast, fluid, and dynamic applications that leverage the power and flexibility of the core of Windows, used by more than a billion people around the world," Microsoft said.

The event was a successor to Microsoft's previous developer events, the Professional Developers Conference and Mix, and attendees were given a Samsung tablet shipping with the Windows 8 "Developer Preview" build

"Build is the first place to dive deep into the future of Windows," Microsoft said.

The Build Conference is still going strong. This year's event will be held in Seattle and online May 21-23, and Microsoft is still focused on things to come as the company asks, "How will AI shape your future?"

Microsoft CEO Satya Nadella is mapping out how the software giant will take advantage of AI.

Ben Kriemann/Getty Images

Microsoft to offer Advanced Micro Devices chips

Microsoft said on May 16 that it plans to offer its cloud computing customers a platform of Advanced Micro Device (AMD) artificial intelligence chips that will compete with components made by current AI kingpin Nvidia (NVDA) , Reuters reported.

The company will also launch a preview of new Cobalt 100 custom processors at the conference. Microsoft announced those chips last November. It says its chips offer 40% better performance than other ARM-designed rivals, and that Adobe, Snowflake, and others are already using them, according to TechCrunch.

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Microsoft's clusters of AMD's flagship MI300X AI chips will be sold through its Azure cloud computing service, giving customers an alternative to Nvidia's H100 family of powerful graphics processing units (GPUs).

AMD's chips are the “most cost-effective GPU out there right now for Azure OpenAI” according to Microsoft, TechCrunch reported.

Nvidia, which declined to comment, is a much larger company than AMD. Its market capitalization is $2.26 trillion, compared with its rival's $263 billion. Nvidia's GPUs dominate the data center chip market for AI, controlling about 80% market share.

However, due to high demand, Nvidia's chips can be hard to obtain.

To build AI models or run applications, companies typically must string together - or cluster - multiple GPUs because the data and computation will not fit on a single processor.

AMD has said its chips are powerful enough to train and run large AI models.

The relative shortage of AI-related chips is also driving big tech players to make their own components.

For example, Microsoft's cloud computing unit also sells access to its own in-house AI chips called Maia.

On May 14, Alphabet's (GOOG) Google announced its sixth-generation TPU (tensor processing unit) called Trillium.

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In November, Amazon's AMZN AWS cloud unit announced new chips for customers to build and run AI applications on, and it plans to offer access to Nvidia’s latest chips.

The demand for new high-powered computer chips is one of the factors behind a surge in copper prices. Copper has jumped nearly 27% this year, with most of the rise coming since the end of March.

Analyst: Azure and cloud 'stole the show'

Microsoft reported better-than-expected third-quarter earnings on April 25.

Chief Executive Satya Nadella told analysts that the strong numbers were powered by the continued strength of Microsoft Cloud, which surpassed $35 billion of revenue, up 23% from a year earlier.

Nadella said that Azure, Microsoft's cloud computing platform, "again took share as customers use our platforms and tools to build their own AI solutions."

TheStreet Pro's Stephen Guilfoyle said, "Azure and the rest of the Microsoft cloud stole the show, growing revenue 31% over last year's quarter and accelerating sequentially from 30% growth the previous quarter."

"The addition of AI services is helping with sales in this unit, with Microsoft's well-established relationship with and investment in OpenAI front and center," he said.

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On Thursday, Wolfe Research tactically shifted its priority to AMD, which the firm added to the "Wolfe Alpha List," replacing Nvidia given the relative move in shares year-to-date.

The firm said that it expects more significant catalysts for Nvidia later this year and expects "numbers to move higher" for both Nvidia and AMD.

Wolfe has an outperform rating and an unchanged $210 price target on AMD shares, and an outperform rating and $1,200 price target on Nvidia, up from $900 previously.

Separately, gamers will be happy to know that Microsoft Activision's latest installment of its "Call of Duty" franchise, which will be released this fall, will be released through its Game Pass subscription service, The Wall Street reported, citing people familiar with the matter.

Under this new plan, gamers could end up paying Microsoft less for the new Call of Duty than it would have made with the traditional "a la carte" approach, though the company is looking to draw new users to its Game Pass subscription service in hopes that they will end up paying more over the long term.

Analysts reset Microsoft stock price targets

Two analysts revamped their price targets for Microsoft on May 17.

RBC Capital raised the firm's price target on Microsoft to $500 from $450 while keeping an outperform rating on the shares after hosting the company's Directors of Investor Relations James Ambrose and Josh Elvidge in Canada.

The firm is more positive on the company's runway of growth and leadership in AI, RBC Capital's analyst told investors in a research note.

While Microsoft's CapEx will likely continue to ramp as it invests in AMD and Nvidia chips and high-compute servers, impacting margins, RBC said, the company is following demand signals and is simultaneously focused on bringing the cost curve down.

Macquarie raised Microsoft's price target to $475 from $460 and kept an outperform rating on the shares.

The firm said Microsoft's global distribution, Azure cloud, and Activision's 350 million gamers will "unlock new subscription and mobile gaming opportunities."

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