AMD challenges NVIDIA's AI chips, why is the stock price still plummeting?

Despite the release of a new product claiming to outperform NVIDIA's similar artificial intelligence (AI) chips in terms of reasoning performance, AMD's stock price still closed sharply lower. Investors seem unimpressed by verbal presentations and are truly looking for signs of returns on AI investments.

On Thursday, October 10th, Eastern Time, during AMD's data center event where they introduced the MI325X AI accelerator and multiple network chips, AMD's stock price briefly rose in the early morning and midday trading sessions, but then continued to decline throughout the afternoon, hitting a daily low of $162 towards the end of the day, with a intraday decline of about 5.3% and ultimately closing down 4%, marking a second consecutive day of decline to the lowest level in a week, with the largest intraday and closing decline since September 3rd.

In theory, the launch of a powerful AI chip should be a positive development, especially since AMD's new product is also competing with NVIDIA's highly anticipated Blackwell architecture chip. So why is AMD's stock price accelerating its decline?

Some media outlets summarized that the decline in stock price indicates that investors are still waiting for returns from AMD's AI business. Their commentary suggests that although AMD has released new chips, the company's recent financial outlook has not changed significantly. Like NVIDIA, AMD also promises to introduce new AI accelerators every year to accelerate innovation. However, AMD still has a long way to go to catch up with NVIDIA, and Wall Street has been waiting for signs of AMD catching up with NVIDIA's progress. This progress may only be visible after AMD's next financial report is released, expected around the end of this month following the release of the company's third-quarter financial results.

The second-quarter financial report released at the end of July this year showed that AMD's data center business net revenue was $2.8 billion, a 115% year-on-year increase. This was mainly due to strong demand for the AI accelerator MI300. As the flagship product competing with NVIDIA's H100, MI300's quarterly sales exceeded $1 billion, far exceeding market expectations. At the time, AMD CEO Lisa Su stated that AMD's AI chip sales were "better than expected," with plans to launch MI325X in the fourth quarter of this year, a "very competitive" MI350 compared to NVIDIA's Blackwell next year, and MI400 in 2026.

After the release of the financial report, some analysts believe that NVIDIA still has a leading advantage over AMD. AMD's data center business is still relatively small compared to NVIDIA — with quarterly sales of only $2.8 billion. In contrast, NVIDIA's data center revenue for the first quarter of the 2025 fiscal year ending in April was $22.6 billion, setting a record high for the business segment for the quarter, with a 23% increase compared to the previous quarter and a staggering 427% year-on-year increaseIn this week's data center event, AMD introduced that the company's latest AI data center GPU, MI325X, is expected to be shipped in the fourth quarter of this year and will be launched in the first quarter of next year through partners such as Dell, Eviden, Gigabyte, H3C, Lenovo, and Supermicro.

Some media outlets have reported that the event on Thursday reflects AMD's increasingly optimistic outlook on the long-term market potential of AI chips. Su Zifeng stated that in the past year, the demand for AI has exceeded AMD's expectations. She now predicts that by 2028, the market size of AI data center GPUs will reach $500 billion, with an annual growth rate of over 60%. Last December, she estimated that the market would exceed $400 billion by 2027.

As for whether AMD's MI325X will outperform NVIDIA's products, the media cannot assert, implying that it is still unknown. It pointed out that the most comparable product to MI325X is not NVIDIA's H200, but NVIDIA's most powerful Blackwell architecture GPU, which has already been launched to customers this quarter. The performance of this architecture GPU may surpass MI325X, as MI325X is based on the same CDNA 3 architecture as AMD's previous MI300X GPU.

Earlier, Wall Street News mentioned that Lynx Equity Strategies commented that the significant drop in AMD's stock price on Thursday may be due to MI325X's inability to significantly change AMD's lagging position and challenge NVIDIA's dominant position effectively. "Unless AMD can demonstrate a clear market share growth driver, the stock may retest its annual low."

Lynx Equity Strategies also pointed out,

"AMD's management may promote that the benchmark test results of its chips are superior to NVIDIA's Hopper series, but in actual workload operation, we believe that MI300X still lags behind NVIDIA's H100. In addition to excellent HBM memory density, software stack, backplane network, and power consumption are equally important."

However, KeyBanc analyst John Vinh believes that even though AMD is far behind NVIDIA, the company's development trajectory is clearly optimistic. It is expected to ship 500,000 pieces of Instinct MI300X AI accelerators this year, further gaining a foothold in the AI market.

Some media reports that the AI hardware sector is attracting significant investments from enterprises, and AMD hopes to get a share of the pie. NVIDIA is currently the leader in the entire market, and some analysts believe that given the huge opportunities in the AI hardware sector, many companies have the potential to succeed