There is no doubt that NVIDIA (NVDA 1.40%) has been the flagship stock of the AI ​​boom so far. Even after the recent decline, the stock is still up more than 600% since the start of 2023, gaining trillions in market value in the process.

However, past performance is no guarantee of future returns, and the AI ​​rally is gaining momentum as investors look for alternatives to Nvidia, which may struggle to regain its highs this year. One chip stock that has a good chance of outperforming Nvidia later this year is Advanced micro devices (AMD 0.81%)the fab-less chipmaker best known for its PC CPUs and currently experiencing rapid growth with GPUs for data centers.

Let’s look at some reasons why AMD can beat Nvidia in the second half of the year.

Image source: Getty Images.

1. The main competitor is weakening

AMD’s biggest competitor in the PC and client market is Intel (INTC 0.87%)the chip manufacturer that has dominated the PC CPU market since its inception and still has the largest market share in this segment.

Intel just announced its biggest restructuring in years. As part of a $10 billion cost-cutting plan, the company plans to lay off at least 15% of its workforce by the end of 2025. The company also reported disappointing second-quarter results, issued weak guidance and cut its dividend. Overall, the announcement painted a picture of a company in disarray, even though CEO Pat Gelsinger has had three years to get the traditional chipmaker back on track.

Intel shares plummeted following the news, and the company’s withdrawal appears to be creating an opportunity for rival AMD.

The next battleground between the two companies could be the AI ​​PC chip market, and AMD seems likely to have an advantage here. AMD CEO Lisa Su said reviews of its new AI PC products like the Zen 5 platform are “very positive” and expressed optimism about PC market growth through 2025, calling it “a good revenue growth opportunity for us.”

Intel also expressed optimism about its Lunar Lake AI PC chip, but acknowledged that it could weigh on margins due to outsourced components and thus will not bring the game-changing change that Intel apparently needs.

AMD is currently also gaining significantly more momentum in the client segment, with sales increasing by 49% to $1.5 billion in the second quarter. Intel, on the other hand, reported growth of only 9% to $7.4 billion in this segment.

It is safe to assume that AMD will continue to gain market share from Intel in this huge market.

2. Data center revenues are increasing

AMD’s Mi300 data center GPU is now available and is rapidly gaining popularity. Data center revenue grew 115% to $2.8 billion in the second quarter, accounting for nearly half of the company’s quarterly revenue.

Mi300 crossed the $1 billion mark in quarterly revenue for the first time and its customer base is growing Microsoft was the first cloud infrastructure to enable general availability of the Instinct Mi300X. Instinct is AMD’s data center platform and AMD said that major server manufacturers such as Dell And Super-microcomputer have Instinct platforms in production.

Data center revenues tend to have higher margins than other segments, which should boost AMD’s profits in the coming quarters as the company expects continued strong growth in the data center space.

The company has also just acquired Silo AI, Europe’s largest private AI lab. This will accelerate the development of generative AI technologies such as inference and training, as well as large language models.

3. Nvidia’s Blackwell delay also gives AMD a chance

Nvidia recently discovered a design flaw in its new Blackwell platform, causing a three-month delay in the delivery of new chips. There is still a shortage of data center GPUs, and the news could give AMD an opportunity to capture more market share. It could also weigh on Nvidia’s results in the next few quarters.

While Nvidia’s leadership position in the data center GPU market is not in danger since the company is much larger than its competitors like AMD, the Blackwell delay could also weigh on its stock price and cause some reputational damage. It could be the most significant setback for Nvidia since the AI ​​rally began.

The future for AMD

Nvidia currently has a market cap of $2.7 trillion and is now expected to slow its growth, making its upside potential seem smaller than that of AMD, which could double its current market cap of $220 billion if data center revenues increase and it takes market share from Intel.

Recent declines in gaming and embedded should soon bottom out and lift overall results. It doesn’t take much to give AMD significant earnings gains, and if the company can beat estimates, the stock could soar in the coming months.