AMD says datacenter still king for profit margins amid AI buzz

CFO talks GPU development, strategy and market dynamics at Nasdaq Investor Conference

AI PCs may be talk of the town right now but AMD's chief financial officer reckons that the datacenter remains the chipmaker's major profit engine, and CPU cores are still key for many workloads.

Speaking at the Nasdaq Investor Conference in London last week, AMD's Jean Hu answered analyst questions about the company's GPU roadmap, AI PCs, and more.

When asked about AMD's gross margins and whether AI PCs or some other business area would have the greatest impact, Hu indicated she believes it will continue to be the datacenter ops.

"Datacenter has been growing much faster than our other businesses. Despite a headwind on the embedded business side, we were able to improve gross margin," she said, referring to Q1 of this year.

The second half of 2024 will see the same dynamics, she added, saying that "the major driver for gross margin improvement continues to be datacenter, and I think next year, it will be a similar picture."

However, with AI PCs a hot topic, Hu was keen to remind everyone about AMD's Computex announcements this month of its Ryzen AI 300 Series laptop platform with the much-vaunted 50 TOPS neural processor, plus its Ryzen 9000 Series chips for desktops.

Again on the topic of AI, Hu talked up AMD's forthcoming GPU accelerator, the MI325, also announced at Computex, which is set to have 288 GB of HBM3E memory and "significant memory capacity and bandwidth better than our competition," meaning Nvidia's current line-up.

"And then next year, we are introducing MI350, which is based on CDNA 4, a new architecture, which is also going to have a 288 GB HBM3E memory," Hu said, claiming it would boost performance by 35x and compete against Nvidia's Blackwell B200. She also said there would be an MI400 coming in 2026 to compete against the "Rubin" platform that Nvidia is lining up for the same year.

In response to a question about traditional (i.e. non-AI) servers, the CFO said the market is "still quite mixed" and noted that "last year, we all know the traditional server market actually declined."

Hu claimed AMD has gained momentum with its Gen 4 Epyc server CPU platforms, saying that in Q1, the company actually got to 33 percent market share against rival Intel. "We actually started to see early signs for a refresh cycle," she said.

CIOs are facing a lot of challenges, Hu claimed, and AMD's latest server platforms can provide the same amount of compute with 40 percent fewer servers, meaning organizations can cut capex and the cost to operate those servers will be also be 40 percent less, she claimed.

And while servers configured for AI have been sucking up much of the server spend, Hu said it is important to remember that other workloads are still vital.

"When you look at the traditional foundational applications, your ERP system, your database and your shopping website, your Meta, Facebook, Instagram, all those things, you don't need the GPU – the CPU has the best TCO for those kind of foundational traditional applications. And those things continue to increase," she said.

"When you have 192 cores with our next generation Turin," Hu said, referring to the upcoming Epyc chips with Zen 5 cores, "you are addressing a lot of problems in the general compute side and the core count has been increasing double-digit, both our competition and ourselves."

On competing for business in the business PC space against Intel, Hu said this has to be viewed as a totally different market to consumer systems, requiring a different approach.

"If you look at the enterprise side, enterprise really requires different go-to-market," she said, explaining that each organization and CIO were different in how they procured PCs, and so AMD has been making an effort during the last two years in its go-to-market side.

"We hired our new chief sales officer from IBM. One of their objectives is focused on enterprise go-to-market approach, not only more feet on the street, but also understand how to approach the enterprise customer," Hu said. The success AMD has seen so far is on the server side, in showing CIOs the total cost of ownership benefit, to get them to convert to choosing AMD servers.

"And the same thing on the PC side, you literally have to convince enterprise CIOs to change in order to expand your market share," Hu claimed, saying that this takes a longer time. ®

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