Image source: Advanced Micro Devices.
Shares of Advanced Micro Devices (NASDAQ: AMD) rose 23.2% in November, according to data provided byS&P Global Market Intelligence. The big news during the month was an announcement from Alphabet's Google that it was installing both AMD and NVIDIA (NASDAQ: NVDA) GPUs in its cloud data centers.
NVIDIA has had great success getting cloud computing companies to buy its pricey Tesla GPUs. Amazon Web Services, Microsoft Azure, and IBM Cloud already offer GPU cloud computing services via NVIDIA's products. Google's announcement, which will put AMD's FirePro S9300 x2 and two NVIDIA Telsa GPUs on offer through its cloud platform beginning next year, is a significant win for both companies.
NVIDIA's data center business is now at an annual run rate of nearly $1 billion, while AMD doesn't break out data center revenue. The opportunity for AMD is immense if the company can continue to win cloud computing deals. An analyst last month estimated that artificial intelligence offers a $15 billion opportunity for semiconductor companies. Even grabbing a fraction of that total would be a boon for AMD.
AMD stock has been on a tear this year, driven by growing optimism that the company is finally on the verge of turning things around. The launch of its mainstream Polaris graphics cards earlier this year has produced revenue growth in its core computing and graphics business, but the company remains unprofitable. Next year, AMD will launch new Zen CPUs and Vega high-end GPUs, both of which will need to be successful for the company to grow into its valuation.
More good news in December has pushed shares of AMD even higher. A rumor emerged on Dec. 6 that AMD and Intel had signed a licensing agreement that would put AMD's GPU technology into Intel's CPUs. There's been no confirmation of any deal at this point, but it's possible that this deal will replace a cross-licensing agreement between Intel and NVIDIA that expires early next year. If that's the case, AMD could see annual payments from Intel. However, AMD graphics showing up in Intel CPUs seems unlikely.
2017 will be a big year for AMD, with the ultimate success of its turnaround set to be determined by the launch of new products. The Google deal in November was a positive, but the company remains far behind NVIDIA.
10 stocks we like better than Advanced Micro Devices When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Advanced Micro Devices wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Nov. 7, 2016
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Timothy Green owns shares of IBM. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, and Nvidia. The Motley Fool owns shares of Microsoft. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.