The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

AMD Stock Prediction

Summary:

The growing need for specialized Artificial Intelligence and Deep Learning computers is a great opportunity for GPU-maker AMD.

AMD Instinct products could be attractive alternatives to Nvidia’s pricey Deep Learning Tesla computers.

AMD’s release of Vega-based Radeon Instinct deep learning computer products could help it offset any future weakness in server-centric x86 processors.

The nascent GPU-Accelerated AI/Deep Learning hardware business is something that Intel could not get involved in.

Long-term algorithmic forecasts are hinting AMD’s stock price is more likely to go up within the next 12 months.

Tractica predicted that Artificial Intelligence revenue will grow from $643.7 million last year to $36.8 billion by 2025. This particular industry has an estimated CAGR of 62.9%. Advanced Micro Devices (AMD) therefore is right to get involved in GPU-accelerated Artificial Intelligence (AI) and Deep Learning compute products.

AMD’s rival Intel (INTC) has no discrete GPU technology or products. AMD might find it easier to compete in GPU-accelerated Artificial Intelligence computers rather than in server-centric processors for the data center industry. Supplying Artificial Intelligence/Deep Learning computer hardware could become as lucrative as supplying x86 server-grade chip products.

Unlike the decades-old server chip market, AI and Deep Learning for data centers is just a budding industry where few corporate networks are beholden to one entity.

Nvidia Should Not Monopolize GPU-Accelerated Deep Learning

As part of the duopoly on GPU chips, AMD can now challenge the monopoly of Nvidia on GPU-accelerated deep learning computers. Nvidia’s data center revenue earned $240 million in its latest quarter, up +192.7% Year-over-Year. It will be a great tragedy if AMD allow Nvidia to solely own this niche market.

Nvidia spent billions of dollars for its GPU-accelerated platform and is now reaping great rewards. Lack of competition in GPU-accelerated Deep Learning computer solutions has allowed Nvidia to sell its Pascal Tesla P100-powered DGX-1 Deep Learning System box for $129,000. Based on the rapid growth in its data center segment, Nvidia is actually finding many buyers for its pricey AI/Deep Learning computers.

AMD’s announcement last month of its Radeon Instinct AI/Deep learning hardware and software solutions could give Nvidia some serious competition. The Radeon Instinct’s base variant will be Polaris-based with peak FP16 performance of 5.7 teraflops, 150 Watt board power and 16 GB of GPU memory. The Radeon Instict MI25 will come later this year with the new GPU Vega architecture.

(Source: AMD)

Technical specs aside, AMD will definitely find customers for its AI/Deep Learning products among small and big corporate clients. AMD could use pricing to undermine the commercial appeal of a $129k Nvidia DGX-1 deep learning system.

On the other hand, GPU- Accelerated Artificial Intelligence and Deep Learning chips are going to be needed by almost all industries and services. AMD and Nvidia could co-exist profitably together in this particular market. I suspect that AMD could catch up with Nvidia on AI GPUs within the next 2-3 years.

(Source: AMD)

Strong Sales From New GPU and Processors Products Will Finance AI Efforts

AMD cannot match the 9-figure R&D budget of Nvidia but I expect AMD to have enough revenue streams to allocate some money for R&D over AI/Deep Learning hardware/software solutions. AMD’s stock has a one-year return of more than 400% since early 2016 because big and small investors alike are very optimistic about AMD’s Polaris/Vega GPUs and Ryzen desktop processors.

A check on Amazon (AMZN) reveals that AMD Polaris RX 480 products are now among the top-selling computer graphic cards. It’s strong clue that AMD is earning enough revenue to develop new products like the Radeon Instinct.

(Source: Amazon)

The release of the much-anticipated high-end Ryzen processor and Vega GPU products before April this year could increase AMD’s revenue stream by as much as 20%. The high-end market for PC gaming is largely dominated by high-end/mid-range products.

Jon Peddie Research’s chart below shows high-end products account for 43% of the global PC gaming hardware market. In short, AMD selling high-end 14-nanometer CPUs and GPUs could be a serious growth catalyst for its topline this year.

Consequently, stronger revenue streams from new products will allow AMD to allocate enough budget to further enhance its Artificial Intelligence and Deep Learning platforms.

Conclusion

AMD gaining 30%-50% share of the GPU-accelerated Deep Learning computer systems market could help its stock breach the $20 price levels within the 12 months. Unlike the x86 consumer and server processor business, GPU-accelerated deep learning machines is something that Intel cannot use contra revenue on.

AMD will only have to contend with Nvidia on GPU-accelerated deep learning computers.

My Buy recommendation for AMD is in line with the highly-positive 12-month algorithmic forecast from I Know First.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

I Know First Success With AMD

I Know First has bullish on AMD in past forecasts. On August 31st, 2016, an I Know First analyst wrote a bullish article on AMD, and discussed the long-term oppurtunity in their radeon technology. In accordance with I Know First’s self-learning algorithmic forecast, AMD shares rose over 40% to date.

This bullish forecast for AMD was sent to I Know First subscribers on August 30th, 2016. To subscribe today click here.