There has been a lot of talk about a potential AI bubble burst coming soon. One of the most most prominent names in the AI bubble theory is Micheal Burry. Burry had famously predicted the 2008 housing crisis, and became famous worldwide after his story was depicted in “The Big Short” Hollywood movie. Burry was portrayed on screen by Oscar-winning actor Christian Bale. If we are indeed in an AI bubble, tech stocks are likely to plummet if it bursts, with companies like AMD (Advanced Micro Devices, Inc.) potentially taking massive losses. Let’s discuss if AMD’s gaming business can protect the stock from a crisis.
Can AMD’s Gaming Sector Protect The Stock From An AI Bubble Burst?
AMD is in a unique position among global chip manufacturers. The company has its fingers in both the CPU (Central Processing Unit) and GPU (Graphics Processing Unit) markets. AMD’s GPUs have historically catered to the gaming sector. However, the coming of generative AI has brought a whole new dimension to GPUs. GPUs today power some of the most powerful AI models in the world. Nvidia (NVDA) is the GOU market leader and the surge in AI demand has pushed Nvidia’s valuation to the top. AMD is also riding the AI wave, launching powerful AI chips to compete with Nvidia.
If we are indeed in an AI bubble, the demand for GPUs for AI purposes will plummet. The gaming industry could absorb some of the chips, but many processors are purpose built for AI use. Additionally, the numbers are not promising. If an AI bubble were to burst, AMD’s gaming division might not be able to save the company’s stock price. And the revenue figures are a clear example.
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According to AMD’s Q2 earnings report, the company saw revenue of $11.5 billion, a 50% increase year over year. The company’s AI data center business saw revenues jump nearly 107% year-over-year. Meanwhile, AMD’s gaming sector saw a revenue dip of 31% year-over-year to less than $800 million. The numbers show that an AI bubble burst will likely not protect AMD’s stock value as the company has a lot riding on the budding industry.
