Nvidia (NVDA) has dominated the stock market over the last few years. The company’s market cap has become bigger than most countries’ GDPs. Nvidia’s rise has also triggered a AI boom, leading to many others following suit. AMD is also a part of the party. While Nvidia (NVDA) has been the clear stock market dominator, AMD’s new innovations could pose a serious threat. Let’s discuss how.
How Is AMD Becoming A Threat To Nvidia Stock Prices?
Nvidia’s (NVDA) record stock price surge comes from the high demand for its chips. AI models require Nvidia’s GPUs (Graphics Processing Unit) for operations. Running these processors is no cheap task. Companies pay from $2,500 to $3,000 every month to rent computing power from Nvidia-powered cloud servers. At CES (Consumer Electronics Show) this year, AMD CEO Lisa Su demonstrated a $1,499 mini PC running the same class of AI model.
Nvidia’s model is based on monthly payments for its GPUs through cloud providers like AWS and Lambda Labs. AMD’s latest innovations could eliminate the monthly fee permanently. Google has also signed deals with Anthropic and Meta to replace Nvidia chips with its own.
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Nvidia’s rental model works because there is no other competitor. However, with AMD’s novel design, the scenario could change very soon. What’s even more concerning for Nvidia is AMD’s position in both CPU and GPU markets. Nvidia, currently, only caters to the GPU market.
Risks
While AMD could potentially dethrone Nvidia’s dominance, a permanent solution could lead to stagnation. Companies would buy a processing unit once, and may not need an upgrade for years. This could lead to profits plateauing.
Other companies could also enter the market with their own cheaper alternatives. Nvidia themselves could develop newer processing units that could pose a threat to AMD as well.