Key Points
AMD is taking on Nvidia in the cloud.
Microsoft welcomes the competition.
Shares of Advanced Micro Devices (NASDAQ: AMD) climbed on Tuesday after the chipmaker expanded its partnership with Microsoft (NASDAQ: MSFT).
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AMD jumps into the next leg of the AI race
As part of their collaboration, Microsoft will deploy AMD's new Helios rack-scale systems on its Azure cloud computing platform to power artificial intelligence (AI) inference workloads for its customers.
Helios combines AMD's Instinct GPUs, Venice CPUs, networking solutions, and software. The integrated system is designed for maximum efficiency to slash the costs of running AI applications.
"We're very focused on providing the best total cost of ownership, the lowest cost per token, all in," AMD executive Forrest Norrod said during an interview with CNBC. "And our customers are telling us that we're achieving that."
AMD plans to begin shipping its Helios systems to Microsoft and other clients later this year.
AMD is emerging as a worthy challenger to Nvidia
Nvidia dominates the market for AI chips used in data centers, with most estimates placing its market share at over 90%.
Yet if Helios enables companies to reduce the costs of running inference and other AI workloads, AMD could quickly win a larger piece of this rapidly expanding pie.
For a business that's still less than one-fifth the size of its larger rival, those potential market share gains could drive substantial stock price appreciation in the months and years ahead.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.