The “Magnificent Seven” stocks have been leading the stock market higher over the last couple of years. Without them — and the ongoing frenzy for artificial intelligence (AI) investments — Wall Street wouldn’t be enjoying an official bull run yet.
But this elite group doesn’t come with a lifetime membership. Investors will eventually move on to a new market-moving club with a different set of members. 60 years ago, there was the “Nifty Fifty,” and the paragons of industry in the Dow Jones Industrial Average index are always on a rolling schedule — the current Dow only has 17 names in common with the version you saw 20 years ago.
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I would posit that the “Magnificent Seven” won’t be the hot ticket forever, either. Tesla seems to be slipping away while a hungry bunch of potential next-level winners are gaining ground.
On that note, it won’t surprise me if Advanced Micro Devices punches a ticket to the next era-defining league of Wall Street’s crown jewels.
AMD’s Path in AI
If Nvidia is the king of AI hardware, I think of AMD as the crown prince. And the kid looks hungry for a higher status over time.
For instance, let’s look at the world’s largest and most powerful supercomputers. Many of these big-iron systems are hard at work training AI engines right now, with a heavy focus on the generative AI back-ends used in tools like ChatGPT or DALL-E 3.
In the latest top-ten list, six systems rely on Nvidia’s AI accelerator chips in the A100 and H100 series. But AMD’s Instinct MI250X serves the same purpose in two of the ten largest number-crunching systems — including the top spot. So AMD has some catching up to do in terms of broad market wins, but the company can compete at the highest level.
Moreover, Nvidia’s AI accelerator chips reportedly cost about four times as much as a comparable AMD solution. It’s not surprising to see heavyweight generative AI system builders offering both Nvidia H100 and AMD Instinct solutions side by side. Their hyperscale customers are clamoring for the most cost-effective AI computing options, and AMD has certainly earned a spot in that discussion.
AMD: A Challenger in AI
AMD undercuts Nvidia’s pricing without sacrificing AI-crunching performance. Plus, the company operates a diverse business with game-changing products in its portfolio.
AMD offers everything from PC and server processors to AI accelerators and custom embedded chips. The $35 billion Xilinx buyout made AMD a giant of custom semiconductors with interests in industrial automation and defense systems.
The financial gap between Nvidia and AMD doesn’t reflect the whole story. AMD should pose a stronger challenge to Nvidia’s AI dominance over time. Even if AMD never takes Nvidia’s AI throne, investors could see massive returns from a reconfiguration of the AI industry’s power balance.
AMD is not just rising to the challenge but is setting the stage for a shift in Wall Street’s dynamics. The chip designer stands out as a stock to watch in 2024 and beyond, and it deserves consideration for the next elite club.
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