Core Insights - Bank of America reiterates a buy rating for AMD, emphasizing a significant growth inflection point expected in the second half of 2026 [1] - AMD is projected to raise its AI addressable market size from $500 billion in 2028 to over $1 trillion by 2030, providing stronger support for long-term growth prospects [1] - The release of the MI400X product and collaboration with OpenAI could see AMD's earnings per share soar from under $4 in 2025 to approximately $10 by 2027, representing over 100% growth [1] Data Center GPU Business - The data center GPU segment has emerged as a major growth driver for AMD, with MI355X gaining rapid customer acceptance and driving approximately 150% quarter-over-quarter revenue growth in the second half of the year [2] - AMD is making significant progress in supply chain preparations for MI450/Helios, with increased customer interest, including a 6GW capacity agreement with OpenAI and a commitment from OCI to deploy at least 50,000 MI450 GPUs starting in Q3 2026 [2] - Morgan Stanley believes these developments lay a solid foundation for AMD to achieve its previously stated goal of reaching hundreds of billions in data center GPU revenue by 2027 [2] Rack-Level Architecture and OpenAI Collaboration - AMD expresses optimism regarding the MI400X product, customer diversification, supply chain coordination, and the ROCm software platform, all of which are being prepared for the OpenAI project launch in the second half of 2026 [3] - Analysts estimate that if AMD executes the full 6GW order from OpenAI, the long-term earnings potential per share could exceed $15 [3] - Currently, AMD holds approximately 3-4% market share in the rapidly growing AI market, with true growth trends dependent on the execution of rack-level architecture and market share expansion [3] Margin Pressure and Competition - Bank of America highlights key risks, including intense competition from larger rivals like NVIDIA and Broadcom [4] - AMD's R&D spending has significantly increased due to recent acquisitions, and this high spending level is expected to continue as the company prioritizes market share growth over profit maximization in the short to medium term [4] - Margin pressure may arise as the product mix shifts towards rack-level systems, which have higher input costs, with gross margins potentially guided to just above 50% during the analyst day [4]

Core Viewpoint - Nvidia has significantly outperformed the market over the past three years, largely due to the rise of generative AI, but Adobe is positioned to potentially outperform Nvidia in the coming years based on current valuations and competitive dynamics [1][2]. Nvidia - Nvidia's stock price has increased more than tenfold since the launch of ChatGPT, making it the most valuable company globally with a market cap exceeding $4 trillion [2]. - The company reported a 73% year-over-year increase in data center revenue for fiscal Q1 2026, leading to a 33% increase in earnings per share (EPS), although this included a $4.5 billion writedown on inventory [5]. - The lifting of the U.S. ban on sales to China allows Nvidia to reverse the writedown on H20 GPUs, which now have value again [5]. - Competitors like AMD are making strides with their own AI accelerator chips, which could impact Nvidia's market share [6]. - Major customers of Nvidia are developing custom AI accelerators, which may reduce demand for Nvidia's general-purpose GPUs in the long run [7]. - Nvidia's forward P/E ratio of 40 raises concerns about its valuation, suggesting that expectations for continued high growth may be overestimated [8]. Adobe - Adobe's Creative Cloud suite is the industry standard for creative professionals, and while generative AI poses a threat, Adobe is investing in its own AI model, Firefly, to enhance its offerings [10]. - The market currently views the risks of AI for Adobe as outweighing the benefits, leading to a stock decline of over 40% from its all-time high [11]. - Adobe's strong customer base and high switching costs help retain users, as familiarity with its software is crucial for professionals in the industry [12]. - The integration of generative AI tools is expected to boost revenue per user and improve retention rates, with a reported 30% year-over-year increase in first-time subscribers [13]. - Management anticipates that revenue from AI products will more than double this year, contributing to a 12% growth in annual recurring revenue last quarter [14]. - Adobe's share buyback strategy, supported by steady free cash flow from subscription revenues, is expected to lead to consistent double-digit EPS growth over the next three years [15].

Core Insights - Advanced Micro Devices (AMD) has developed a significant AI accelerator business, but it remains small compared to Nvidia, which generated over $39 billion in revenue from its data center segment in the last quarter, while AMD's total AI accelerator revenue for 2024 is only $5 billion [1] - AMD's latest GPUs, the Instinct MI350X and MI355X, deliver four times the AI compute performance and 35 times the AI inferencing performance compared to previous models, but they do not surpass Nvidia's latest offerings [2] - AMD plans to release the MI400 series in 2026, claiming the MI400X will be ten times more powerful than the MI300X, featuring up to 432 GB of HBM4 memory and 19.6 TB/s memory bandwidth [4] - Nvidia is expected to release its Vera Rubin chips in late 2026, which will significantly enhance performance over its current generation [5] - AMD's MI400X is anticipated to outperform Nvidia's current products, but Nvidia's next-gen Rubin chips may ultimately prevail [6] - AMD is also set to launch a new rack-scale AI solution called Helios in 2026, which will include up to 72 MI400 GPUs and advanced server CPUs [7] - Despite AMD's advancements, Nvidia is likely to maintain its market leadership due to its powerful hardware and established CUDA software ecosystem [8] - The AI chip market is projected to reach $500 billion by 2028, and AMD's growth in AI chip revenue does not necessarily require it to surpass Nvidia [9] - With the upcoming MI400 series and Helios, AMD is positioned for substantial growth in AI-related revenue, although it is expected to remain in second place behind Nvidia [10]