Advanced Micro Devices said on Thursday it plans to start mass production of a new version of its Artificial Intelligence (AI) chip called the MI325X in the fourth quarter of the year, as it seeks to bolster its presence in a market dominated by Nvidia.

At an event in San Francisco, AMD CEO Lisa Su said the company plans to release its next-generation MI350 series chips in the second half of 2025. These chips include an increased amount of memory and will boast a new underlying architecture that AMD said will improve performance significantly over the prior MI300X and MI250X chips.

The announcements were broadly expected based on AMD disclosures earlier this year. They failed to cheer investors, who sent AMD shares down nearly five percent in afternoon trading. Some analysts attributed the fall to the absence of large new cloud-computing customers for the chips.

Shares of rival Nvidia were up 1.5 percent while Intel fell 1.6 percent.  

Demand for AI processors from major technology firms such as Microsoft and Meta Platforms has been far outpacing supply from Nvidia and AMD, allowing the semiconductor companies to sell as much as they can produce.

That has driven a massive rally in chip stocks over the past two years, with AMD’s shares up about 30 percent since a recent low in early August. 

“There are no new customers announced so far,” said Summit Insights research analyst Kinngai Chan, adding that the stock had gained ahead of the event in anticipation of “something new.”

Santa Clara, California-based AMD said vendors such as Super Micro Computer would begin to ship its MI325X AI chip to customers in the first quarter of 2025. The AMD design aims to compete with Nvidia’s Blackwell architecture.

The MI325X chip uses the same architecture as the already-available MI300X, which AMD launched last year. The new chip includes a new type of memory that AMD said will speed AI calculations.

AMD’s next-generation AI chips are likely to put further pressure on Intel, which has struggled to deploy a coherent AI chips strategy. Intel has forecast AI chip sales of more than $500 million (roughly Rs. 4,203 crore) in 2024.

New Server, PC Chips

AMD’s Su also said at the event that the company does not currently have plans to use contract chip manufacturers beyond Taiwan’s TSMC for advanced manufacturing processes, which are used to produce speedy AI chips.

“We would love to use more capacity outside of Taiwan. We are very aggressive in the use of TSMC’s Arizona facility,” Su said.

AMD also unveiled several networking chips that help speed moving data between chips and systems inside data centers.

The company announced the availability of a new version of its server central processing unit (CPU) design. The family of chips formerly codenamed Turin includes a version of one of them that is designed to keep the graphics processing units (GPUs) fed with data – which will speed AI processing.

The flagship chip boasts nearly 200 processing cores and is priced at $14,813 (roughly Rs. 12.45 lakh). The whole line of processors uses the Zen 5 architecture that offers speed gains of as much as 37 percent for advanced AI data crunching.

Beyond the data center chips, AMD announced three new PC chips aimed at laptops, based on the Zen 5 architecture. The new chips are tuned to run AI applications and will be capable of running Microsoft’s Copilot+ software.

In July, AMD raised its AI chip forecast to $4.5 billion (roughly Rs. 37,834 crore) for the year from its previous target of $4 billion (roughly Rs. 33,630 crore). Demand for its MI300X chips has surged because of the frenzy around building and deploying generative AI products.

This year analysts expect AMD to report data center revenue of $12.83 billion (roughly Rs. 10,78,711 crore), according to LSEG estimates. Wall Street expects Nvidia to report data center revenue of $110.36 billion (roughly Rs. 9,27,877 crore). Data center revenue is a proxy for AI chips needed to build and run AI applications.

Analysts’ rising earnings expectations have kept AMD and Nvidia’s valuations in check despite the share surge. Both the companies trade at more than 33 times their 12-month forward earnings estimates, compared with the benchmark S&P 500’s 22.3.

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Samsung Electronics is not interested in spinning off its contract chip manufacturing business as well as its logic chip designing operation, its chairperson Jay Y. Lee told Reuters on Monday.

Analysts say the two businesses are incurring billions of dollars of annual losses due to weak demand and have been dragging down the overall performance of the South Korean company, which is the world’s largest memory chipmaker.

Samsung has been expanding into logic chip designing and contract chip manufacturing to lower its reliance on bread-and-butter memory chips. Logic chips are used to process data.

Lee announced his vision in 2019 to overtake Taiwan’s TSMC as the world’s largest contract chipmaker by 2030.

The company has since announced billions of dollars of investments in contract chip manufacturing, building new plants in South Korea and the United States.

However, several sources familiar with the matter have told Reuters that Samsung has struggled to win big orders from customers to fill up the new capacity.

Asked if Samsung was considering carving out the chip manufacturing business called foundry or its System LSI logic chip designing business, Lee told Reuters: “We are hungry to grow the business. Not interested in spinning (them) off.”

Lee also said Samsung’s project to build a new chip factory in Taylor, Texas has been “a little bit tough, because of a changing situation (and the US presidential) election.”

He did not elaborate. Samsung Electronics did not comment further.

Lee was speaking during a visit to the Philippines where he accompanied South Korean President Yoon Suk Yeol to a summit with President Ferdinand Marcos Jr.

In April, Samsung said it had pushed back the production schedule of the Taylor plant to 2026 from its earlier plan of late 2024, and said operations would be managed in a phased manner depending on customer demand.

The move underscores challenges it faces in its efforts to overtake bigger rival TSMC, which counts Apple and Nvidia as major customers.

Last year, Samsung posted an operating loss of KRW 3.18 trillion ($2.4 billion or roughly Rs. 19,830 crore) from the foundry and System LSI businesses, according to average estimates of nine analysts reviewed by Reuters.

Samsung does not provide a performance breakdown of the two businesses.

Analysts estimate that the two operations would report another loss of KRW 2.08 trillion (roughly Rs. 12,971 crore) this year.

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Arm Holdings approached Intel about potentially buying the ailing chipmaker’s product division, only to be told that the business isn’t for sale, according to a person with direct knowledge of the matter.

In the high-level inquiry, Arm didn’t express interest in Intel’s manufacturing operations, said the person, who asked not to be identified because the discussions were private. Intel has two main units: a product group that sells chips for personal computers, servers and networking equipment, and another that operates its factories.

Representatives for Arm and Intel declined to comment.

Intel, once the world’s largest chipmaker, has become the target of takeover speculation since a rapid deterioration of its business this year. The company delivered a disastrous earnings report last month — sending its shares on their worst rout in decades — and is slashing 15,000 jobs to save money. It’s also scaling back factory expansion plans and halting its long-cherished dividend.

As part of its turnaround efforts, Intel is separating the chip product division from its manufacturing operations. The move is aimed at attracting outside customers and investors, but it also lays the groundwork for the company to be split up — something Intel has considered, Bloomberg reported last month.

Arm, which is majority-owned by SoftBank Group Corp., makes much of its revenue selling chip designs for smartphones. But Chief Executive Officer Rene Haas has sought to broaden its reach outside of that industry. That’s included a push into personal computers and servers, where its chip designs are going up against Intel’s. Though Intel doesn’t have the technological edge it once held, the Santa Clara, California-based company remains dominant in those markets. 

Combining with Intel would help Arm’s reach and kick-start a move toward selling more of its own products. The company currently licenses technology and designs to customers, who then turn them into complete components. Its client list includes the biggest names in technology, such as Amazon.com, Qualcomm, and Samsung Electronics.

Under Haas, the company has moved more in the direction of offering fully formed products — potentially putting it in competition with its licensees.

Arm, based in Cambridge, England, only has a fraction of the revenue of Intel. But its valuation has soared since an initial public offering last year and now stands at more than $156 billion (roughly Rs. 13,05,862 crore). Investors see the company as a beneficiary of the AI spending boom, especially as it moves further into data center chips. Arm also has the backing of Japan’s SoftBank, which owns an 88 percent stake, potentially giving the company additional financial clout.

Intel, in contrast, has lost more than half its value this year and has a current market capitalization of $102.3 billion (roughly Rs. 8,56,344 crore). But the company has other options to consider. Apollo Global Management Inc. offered to make an investment in the company, Bloomberg reported this week. The firm indicated in recent days that it would be willing to put in as much as $5 billion, marking a vote of confidence for CEO Pat Gelsinger.

Intel also plans to sell part of its stake in semiconductor maker Altera Corp. to private equity investors. That business, which the chipmaker bought in 2015, was separated from Intel’s operations last year with the goal of taking it public. And speculation of a Qualcomm takeover boosted Intel shares in the past week.

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A potential deal to buy Intel could accelerate Qualcomm’s diversification but will burden the smartphone chipmaker with a loss-making semiconductor manufacturing unit that it may struggle to turn around or sell, analysts said.

A buyout will also face tough antitrust scrutiny globally as it would unite two crucial chip firms in what would be the sector’s biggest ever deal, creating a behemoth with a strong share of the smartphone, personal computer and server markets.  

Shares of Intel rose nearly three percent on Monday, after media reports late on Friday about Qualcomm’s early-stage approach for the struggling chipmaker. Qualcomm’s shares were down 1.8 percent. 

“The rumored deal between Qualcomm and Intel is intriguing on many levels and, from a pure product perspective, makes a certain degree of sense as they have a number of complementary product lines,” said TECHnalysis Research founder Bob O’Donnell.

“The reality of it actually occurring, however, is very low. Plus, it is unlikely Qualcomm would want all of Intel and trying to break apart the product business from the foundry business right now just would not be possible,” he said.

Once the dominant force in the semiconductor industry, five-decade-old Intel is facing one of its worst periods as losses mount at the contract manufacturing unit it is building out in hopes of challenging TSMC. 

Intel’s market value has fallen below $100 billion (roughly Rs. 8,36,313 crore) for the first time in three decades as the company has missed out on the generative AI boom after passing on an OpenAI investment. 

As of last close, its market capitalisation was less than half that of potential suitor Qualcomm, which has a value of about $190 billion (roughly Rs. 15,88,934 crore).

Considering Qualcomm had around $7.77 billion (roughly Rs. 64,980 crore) in cash and cash equivalents as of June 23, analysts expect the deal will mostly be funded through stock and would be highly dilutive for Qualcomm’s investors, likely raising some apprehension.

Qualcomm, which also supplies to Apple, has quickened its efforts to expand beyond its mainstay smartphone business with chips for industries including automotive and PCs under CEO Cristiano Amon. But it still remains overly reliant on the mobile market, which has struggled in recent years due to the post-pandemic demand slump.

Amon is personally involved in the Intel negotiations and has been examining various options for a deal for the company, sources have told Reuters.     

This is not the first time Qualcomm is pursing a large acquisition. It had offered to buy rival NXP Semiconductors for $44 billion (roughly Rs. 3,67,973 crore) in 2016, but abandoned the bid two years later after failing to secure a nod from Chinese regulators.

Foundry Conundrum 

While Intel designs and manufactures its chips that power personal computers and data centers, Qualcomm has never operated a chip factory. It uses contract manufacturers such as TSMC and designs and other technology supplied by Arm Holdings. 

Qualcomm lacks the experience needed to ramp up Intel’s fledgling foundry business, which recently named Amazon.com as its first major customer, according to analysts. 

“We do not know why Qualcomm would be a better owner for those assets,” said Stacy Rasgon of Bernstein. 

“We do not really see a scenario without them either; we do not think anyone else would really want to run them and believe scrapping them is unlikely to be politically viable,” he added.

Intel’s foundry business is seen as crucial to Washington’s goal of growing domestic chip manufacturing. The company has secured about $19.5 billion (roughly Rs. 1,63,079 crore) in federal grants and loans under the CHIPS Act to build and expand factories across four US states. 

Some analysts said Intel would prefer outside investments instead of a sale, pointing to a recent move to make the foundry business more independent. 

Bloomberg News reported over the weekend that Apollo Global Management, already a partner in Intel’s Ireland facility, has offered an investment of as much as $5 billion (roughly Rs. 41,814 crore) in the company.

Qualcomm could also decide to buy parts of Intel’s business, instead of the entire company. Reuters had reported earlier this month that it had particular interest in Intel’s PC design unit.

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Qualcomm has explored the possibility of acquiring portions of Intel’s design business to boost the company’s product portfolio, according to two sources familiar with the matter.

The mobile chipmaker has examined acquiring different pieces of Intel, which is struggling to generate cash and looking to shed business units and sell off other assets, the people said.

Intel’s client PC design business is of significant interest to Qualcomm executives, one of the sources said, but they are looking at all of the company’s design units.

Other pieces of Intel such as the server segment would make less sense for Qualcomm to acquire, another source with knowledge of Qualcomm’s operations said.

Qualcomm has not approached Intel about a potential acquisition and declined to comment on its plans, an Intel spokesperson said. Intel is “deeply committed to our PC business,” the spokesperson said.

Qualcomm declined to comment.

The $184 billion (roughly Rs. 15,44,218 crore) Qualcomm, which is known for chips found in smartphones and counts Apple as a customer, has been working on plans to buy pieces of Intel for months. Qualcomm’s interest and plans have not been finalised and could change, according to the sources.

The two sources declined to be named as they were not authorised to discuss the matter publicly.

Intel reported a disastrous second quarter last month, which included a 15 percent reduction in its staff and a pause on paying dividends. Executives are grappling with how to continue to fund the company’s manufacturing plans and generate cash.

Its PC client business revenue dropped eight percent to $29.3 billion (roughly Rs. 2,45,900 crore) last year, amid overall weakness in the PC market.

Once known for it’s “Intel Inside” marketing campaign, Intel’s client group makes laptop and desktop chips used in machines around the world. Executives have said the introduction of Artificial Intelligence (AI) PCs will drive consumers to upgrade their computers and generate more sales.

Qualcomm generated $35.82 billion (roughly Rs. 3,00,451 crore) in overall revenue in its last fiscal year.

Earlier this week Intel launched a new PC chip called Lunar Lake that its executives said offers superior performance for AI applications. Taiwan Semiconductor Manufacturing Co. fabricated significant portions of the chips, which Intel historically did in-house.

Intel’s board is set to meet next week to weigh a proposal from Intel CEO Pat Gelsinger and other executives on how to trim its operations in an attempt to save cash. Potential options include a sale of its programmable chip unit, Altera, Reuters reported.

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