If you hold AMD shares, here's a crucial point to focus on right now.
In the rapidly growing AI data center market, AMD is making strides to challenge Nvidia's dominance. Known for its software, networking, and hardware solutions favoured by AI researchers, Nvidia currently holds a substantial lead in revenue from data center GPUs. However, AMD is strategically positioning itself as a formidable competitor [1].
AMD's strategy revolves around innovation, collaboration, and cost-effectiveness. The company has recently launched new Instinct GPUs and its first rack-scale solution, tailored to AI workloads in data centers [1]. To facilitate easier adoption and flexibility, AMD has released ROCm 7.0, its next-generation open-source AI software [1].
Strategic partnerships are another key element of AMD's approach. These collaborations aim to enhance the viability and adoption of AMD's AI technology across the industry, a crucial factor in challenging Nvidia's dominant position [1]. AMD is also focusing on pricing, offering competitive performance at a lower cost to attract customers sensitive to price points, particularly in large-scale deployments [1].
AMD's efforts are paying off. In Q2 2025, the company's data center revenue grew 14% year-over-year, driven by demand for EPYC CPUs and GPUs suited for AI applications [2][4][5]. Despite facing operational challenges, such as export restrictions that impacted earnings by about $800 million, AMD remains optimistic about future market share gains [2][4].
While Nvidia currently leads with a data center GPU revenue over 25 times AMD's revenue in 2024, AMD's roadmap, combining advanced hardware, open software ecosystems, cost advantages, and partnerships, is designed to erode Nvidia's dominance and expand AMD's foothold in the AI data center segment [1][2].
Investors will want to closely watch AMD's data center segment to justify its valuation, which currently trades at the same forward price-to-earnings (P/E) multiple as Nvidia [3]. The market for data center chips has been dominated by Nvidia, but AMD has made significant strides, with Amazon being a major buyer of AMD's FPGAs for its cloud business [6].
AMD's future looks promising. The company expects the data center market for artificial intelligence (AI) accelerators to exceed $500 billion by 2028, representing annualized growth of more than 60% [7]. Analysts expect AMD's total revenue to reach $44 billion by 2027, with earnings per share growing 30% annually to reach $7.12 [8].
With the shift in AI workloads from training to inference driving the growth in the data center market, AMD is well-positioned to capitalize on this trend. The company's acquisition of Xilinx brought over industry-leading FPGAs for data center use, and its acquisition of Pensando Systems expanded its chip lineup to data processing units (DPUs) [9].
In conclusion, AMD's approach to overtaking Nvidia centers on innovation with open and scalable AI platforms, strategic collaboration, and competitive pricing to gain share in an increasingly AI-driven data center market [1]. The share price of AMD could potentially double within the next three years due to its earnings growth prospects [10].
Investors should closely monitor AMD's data center segment to evaluate its valuation, as it is currently at the same forward price-to-earnings (P/E) multiple as Nvidia.
AMD's strategy for challenging Nvidia's dominance in the AI data center market includes innovation, cost-effectiveness, and strategic partnerships.
In the forecasted growth of the AI data center market, analysts expect AMD's total revenue to reach $44 billion by 2027 with earnings per share growing 30% annually.
