Why Is AMD Stock Trading Higher Thursday?

Nvidia Corp NVDA rival Advanced Micro Devices, Inc AMD has launched a new generation of AI chips, estimating a $45 billion market for its data center AI processors this year, an increase from the $30 billion forecast in June. 

The update has sent the stock price soaring.

The company introduced two new chips from its MI300 lineup: the MI300X, designed for generative AI applications, and another chip aimed at supercomputers. The MI300X features advanced high-bandwidth memory to enhance performance, Reuters reports. 

Meta Platforms Inc META and Microsoft Corp MSFT backed ChatGPT parent OpenAI disclosed their decision to adopt AMD's chips.

AMD CEO Lisa Su revealed that for the coming year, AMD has secured a "significant" supply of AI chips valued "well above" $2 billion. 

The company has reserved a substantial collection and already has a customer base exceeding this value. 

As demand for AI chips surges, AMD predicts the market for data center AI chips will expand to about $400 billion by 2027.

Nvidia holds approximately 80% of the AI chip market, including custom processors from Alphabet Inc's GOOG GOOGL Google, and Microsoft. Nvidia recorded significant AI revenues in its data center segment, with $29.12 billion reported this year.

AMD's newly launched MI300 series directly challenges Nvidia's flagship AI processors. Alongside the hardware, AMD introduced new software for deploying these AI chips.

AMD stock has gained 82.5% year-to-date, and Nvidia gained 218%.

Price Action: AMD shares traded higher by 2.94% at $120.25 premarket on the last check Thursday.