Microsoft CEO Satya Nadella Just Announced Great News for AMD Stock Investors

Advanced Micro Devices (AMD +8.04%) has been on fire over the past 12 months, with its shares soaring 169% despite a recent pullback. The company is capitalizing on the expanding artificial intelligence (AI) infrastructure spending, and its revenue and earnings have been growing at a good clip as a result. However, AMD may still only be getting started. Recent comments from Microsoft (MSFT +1.04%) CEO Satya Nadella highlight the large opportunity AMD can tap into over the next few years. Here is what investors need to know.

The agentic AI boom

Nvidia‘s GPUs (Graphics Processing Units) were the defining hardware of the first phase of the ongoing AI revolution. However, we are now moving into a new era dominated by AI agents, or at least, that’s what some industry insiders, including Nvidia’s CEO, Jensen Huang, believe. AI agents are autonomous systems that don’t need direct input to take action. They can organize, plan, execute, and work toward goals.

At scale, the right AI agents could automate many tasks and lead to significant productivity gains for large companies. Microsoft is recognizing this potential and working hard to build agentic AI systems that meet its customers’ needs. And to that end, it will order racks of AMD’s products. Here’s why. AMD is one of the leaders in the CPU (Central Processing Unit) market, and as Satya Nadella said, “When it comes to running agents, CPUs are just as important as GPUs.”

AMD had previously made this point. The company argued that during the first wave of the AI revolution, the CPU-to-GPU ratio was between 1:4 and 1:8. But the age of agentic AI will bring it closer to 1:1 or, in some cases, a higher number on the CPU side. In plain English, that means we should expect sustained demand for AMD’s CPUs over the next few years.

AMD thinks the server CPU total addressable market will be worth over $120 billion by 2030, recording a compound annual growth rate of more than 35% through then. Of course, AMD isn’t the only company trying to capitalize on this opportunity. Its longtime rival, Intel, is also a major player that could cash in on the soaring demand for CPUs, and even Nvidia is throwing its hat into the ring.

However, this isn’t a winner-take-all industry, and there should be room for multiple winners. Besides, AMD benefits from a wide moat thanks to its long-standing expertise in this niche and high switching costs. The company has also made market share gains over Intel in recent quarters, partly thanks to its high-performance EPYC processors and its avoidance of the manufacturing challenges Intel has encountered. For all those reasons, AMD remains a great stock to buy to profit from the continued growth of the AI industry.