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Shares of Advanced Micro Devices (NASDAQ: AMD) surged for the second day in a row on Thursday following the announcement that Alphabet's (NASDAQ: GOOG)(NASDAQ: GOOGL) Google planned to integrate AMD's server GPUs into its cloud platform. AMD stock was up about 9.5% at 3:30 p.m. EST, adding to a gain of nearly 10% on Wednesday.
Rival NVIDIA (NASDAQ: NVDA) already has a presence at most of the major cloud-computing vendors, including Amazon Web Services, Microsoft's Azure, and IBM's cloud platform. For AMD, the Google deal marks the second significant cloud win for the company in recent months, following a deal that will put its GPUs into Alibaba's cloud.
The Google deal represents progress for AMD, which has failed to capitalize on the growing trend of GPUs being used in the data center to the same extent as NVIDIA. NVIDIA's data center business is booming, with revenue tripling during the third quarter, to $240 million. AMD doesn't break out its data center GPU sales.
While some optimism is warranted due to this deal, Google is also adding NVIDIA GPUs to its cloud platform. This move fits in with Google's general push to make its cloud platform heterogeneous, not dependent on any single vendor. The company is working on developing a server based on IBM's POWER9 CPU, for example. Supporting both major GPU vendors makes sense given this strategy.
A recent note from analyst Ian Ing estimates that artificial intelligence could be a $15 billion opportunity for chip companies by 2025. NVIDIA is singled out as having an advantage in this area, while AMD is considered "too resource constrained to fully address the opportunity." With AMD fighting to win back market share in the GPU and CPU markets on a research and development budget that has been slashed over the past few years, that concern seems valid.
The Google cloud deal is certainly good news for AMD. But a 20% move in two days is hard to justify.
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