How AMD became a chip giant and leapfrogged Intel after years of playing catch-up
Advanced Micro Devices made history this year when it surpassed Intel by market cap for the first time ever. Intel has long held the lead in the market for computer processors, but AMD’s ascent results from the company branching out into entirely new sectors.
In one of the biggest semiconductor acquisitions in history, AMD purchased adaptive chip company Xilinx in February for $49 billion. Now, AMD chips are in two Tesla models, NASA’s Mars Perseverance land rover, 5G cell towers and the world’s fastest supercomputer.
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“AMD is beating Intel on all the metrics that matter, and until and unless Intel can fix its manufacturing, find some new way to manufacture things, they will continue to do that,” said Jay Goldberg, semiconductor consultant at D2D Advisory.
But a decade ago, analysts had a very different outlook for AMD.
“It was almost a joke, right? Because for decades they had these incredible performance problems,” Goldberg said. “And that’s changed.”
CNBC sat down with AMD CEO Lisa Su to hear about her company’s remarkable comeback, and huge bets on new types of chips in the face of a PC slump, fresh restrictions on exports to China and shifting industry trends.
‘Real men have fabs’
AMD was founded in 1969 by eight men, chief among them Jerry Sanders. The famously colorful marketing executive had recently left Fairchild Semiconductor, which shares credit for the invention of the integrated circuit.
“He was one of the best salesmen that Silicon Valley had ever seen,” said Stacy Rasgon, semiconductor analyst at Bernstein Research. “Stories of lavish parties that they would throw. And there’s one story about him and his wife coming down the stairs of the turret at the party in matching fur coats.”
AMD Co-Founder Jerry Sanders poses at the original headquarters of Advanced Micro Devices, or AMD, in Sunnyvale, California, in 1969
AMD
He also coined an infamous phrase about chip fabrication plants, or fabs.
“Jerry Sanders was very famous for saying, ‘Real men have fabs,’ which obviously is a comment that is problematic on a number of levels and has largely been disproven by history,” Goldberg said.
As technology advances, making chips has become prohibitively expensive. It now takes billions of dollars and several years to build a fab. AMD now designs and tests chips and has no fabs.
“When you think about what do you need to do to be world class and design, it’s a certain set of skills,” Su said. “And then what do you need to do to be world class In manufacturing? It’s a different set of skills and the business model is different, the capital model is different.”
Back in the ’70s, AMD was pumping out computer chips. By the ’80s, it was a second-source supplier for Intel. After AMD and Intel parted ways, AMD reverse engineered Intel’s chips to make its own products that were compatible with Intel’s groundbreaking x86 software. Intel sued AMD, but a settlement in 1995 gave AMD the right to continue designing x86 chips, making personal computer pricing more competitive for end consumers.
In 2006, AMD bought major fabless chip company ATI for $5.4 billion. Then in 2009, AMD broke off its manufacturing arm altogether, forming GlobalFoundries.
“That’s when their execution really started to take off because they no longer had to worry about the foundry side of things,” Goldberg said.
GlobalFoundries went public in 2021 and remains a top maker of the less advanced chips found in simpler components like a car’s anti-lock brakes or heads-up display. But it stopped making leading-edge chips in 2018. For those, AMD turned to Taiwan Semiconductor Manufacturing Co., which now makes all of AMD’s most advanced chips.
Catching Intel
AMD only has major competition from two other companies when it comes to designing the most advanced microprocessors: Nvidia in graphics processing units, GPUs, and Intel in central processing units, CPUs.
While AMD controls far less GPU and CPU market share than Nvidia and Intel, respectively, it’s made remarkable strides since moving away from manufacturing and reducing capital expenditure.
Meanwhile, Intel doubled down on manufacturing last year, committing $20 billion for new fabs in Arizona and up to $100 billion in Ohio, for what it says will be the world’s largest chip-making complex. But the projects are still years away from coming online.
“Intel is just not moving forward fast enough,” Goldberg said. “They’ve said they expect to continue to lose share in next year and I think we’ll see that on the client side. And that’s helped out AMD tremendously on the data center side.”
AMD’s Zen line of CPUs, first released in 2017, is often seen as the key to the company’s recent success. Su told CNBC it’s her favorite product. It’s also what analysts say saved AMD from near bankruptcy.
“They were like literally, like probably six months away from the edge and somehow they pulled out of it,” Rasgon said. “They have this Hail Mary on this new product design that they’re still selling like later generations of today, they call it Zen is their name for it. And it worked. It had a massively improved performance and enabled them to stem the share losses and ultimately turn them around.”
AMD CEO Lisa Su shows the newly released Genoa CPU, the company’s 4th generation EPYC processor, to CNBC’s Katie Tarasov at AMD’s headquarters in Santa Clara, California, on November 8, 2022
Jeniece Pettitt
Among the Zen products, AMD’s EPYC family of CPUs made monumental leaps on the data center side. Its latest, Genoa, was released earlier this month. AMD’s data center customers include Amazon Web Services, Google Cloud, Oracle, IBM and Microsoft Azure.
“If you looked at our business five years ago, we were probably more than 80% – 90% in the consumer markets and very PC-centric and gaming-centric,” Su said. “As I thought about what we wanted for the strategy of the company, we believed that for high-performance computing, really the data center was the most strategic piece of the business.”
AMD’s revenue more than tripled between 2017 and 2021, growing from $5.3 billion to over $16 billion. Intel’s annual revenue over that stretched, meanwhile, increased about 25% from close to $63 billion in 2017 to $79 billion last year.
Geopolitical concerns and PC slump
AMD’s success at catching up to Intel’s technological advances is something many attribute to Su, who took over as CEO in 2014. AMD has more than tripled its employee count since then. Su was Fortune’s #2 Business Person of the Year in 2020 and the recipient of three of the semiconductor industry’s top honors. She also serves on President Joe Biden’s Council of Advisors on Science on Technology, which pushed hard for the recent passage of the CHIPS Act. It sets aside $52 billion for U.S. companies to manufacture chips domestically instead of overseas.
“It’s a recognition of just how important semiconductors are to both economic prosperity as well as national security in the United States,” Su said.
With all the world’s most advanced semiconductors currently made in Asia, the chip shortage highlighted the problems of overseas dependency, especially amid continued tension between China and Taiwan. Now, TSMC is building a $12 billion 5-nanometer chip fab outside Phoenix.
“We’re pleased with the expansion in Arizona,” Su said. “We think that’s a great thing and we’d like to see it expand even more.”
Earlier this month, the Biden administration enacted big new bans on semiconductor exports to China. AMD has about 3,000 employees in China and 25% of its sales were to China last year. But Su says the revenue impact has been “very small.”
“When we look at the most recent regulations, they’re not significantly impacting our business,” Su said. “It does affect some of our highest-end chips that are used in sort of AI applications. And we were not selling those into China.”
What is hurting AMD’s revenue, at least for now, is the PC slump. In its third-quarter earnings report earlier this month, AMD missed expectations, shortly after Intel warned of a soft fourth quarter. PC shipments were down nearly 20% in the third quarter, the steepest decline in more than 20 years.
“It’s down a bit more than perhaps we expected,” Su said. “There is a cycle of correction which happens from time to time, but we’re very focused on the long-term road map.”
Going custom
It’s not just PC sales that are slowing. The very core of computer chip technology advancement is changing. An industry rule called Moore’s Law has long dictated that the number of resistors on a chip should double about every two years.
“The process that we call Moore’s Law still has at least another decade to go, but there’s definitely, it’s slowing down,” Goldberg said. “Everybody sort of used CPUs for everything, general purpose compute, but that’s all slowed down. And so now it suddenly makes sense to do more customized solutions.”
Former Xilinx CEO Victor Peng and AMD CEO Lisa Su on stage in Munich, Germany, at the
AMD
That’s why AMD acquired Xilinx, known for its adaptive chips called Field-Programmable Gate Arrays, or FPGAs. Earlier this year, AMD also bought cloud startup Pensando for $1.9 billion.
“We can quibble about some of the prices they paid for some of these things and what the returns will look like,” said Goldberg, adding that the acquisitions were ultimately a good decision. “They’re building a custom compute business to help their customers design their own chips. I think that’s a very, it’s a smart strategy.”
More and more big companies are designing their own custom chips. Amazon has its own Graviton processors for AWS. Google designs its own AI chips for the Pixel phone and a specific video chip for YouTube. Even John Deere is coming out with its own chips for autonomous tractors.
“If you really look underneath what’s happening in the chip industry over the last five years, everybody needs more chips and you see them everywhere, right?” Su said. “Particularly the growth of the cloud has been such a key trend over the last five years. And what that means is when you have very high volume growth in chips, you do want to do more customization.”
Even basic chip architecture is at a transition point. AMD and Intel chips are based on the five-decade-old x86 architecture. Now ARM architecture chips are growing in popularity, with companies like Nvidia and Ampere making major promises about developing Arm CPUs, and Apple switching from Intel to self-designed ARM processors.
“My view is it’s really not a debate between x86 and Arm,” Su said. “You’re going to see basically, these two are the most important architectures out there in the market. And what we’ve seen is it’s really about what you do with the compute.”
For now, analysts say AMD is in a strong position as it diversifies alongside its core business of x86 computing chips.
“AMD should fare much better in 2023 as we come out of the cycle, as their performance gains versus Intel start to become apparent, and as they start to build out on some of these new businesses,” Goldberg said.
Intel did not immediately respond to a request for comment.
Correction: “And we were not selling those into China,” said Lisa Su, AMD’s CEO. Her quote has been updated to reflect a typo that appeared in an earlier version of this article.
Technology
Google restores Joe Biden to ‘U.S. presidents’ search results, blames ‘data error’ for omission
David Gray | Bloomberg | Getty Images
Google on Thursday blamed a “data error” after users reported that former President Joe Biden was missing from the company’s search results.
Users on Wednesday noticed that results for search queries that included “US Presidents,” “United States Presidents” and “US Presidents in order” did not include Biden, who concluded his four-year presidential term on Monday. Users reported seeing a list of presidents ranging from George Washington to President Donald Trump. Some users posted screenshots of their results showing how the lists omitted Biden.
CNBC tried searching for U.S. presidents on Wednesday night and also encountered the results that omitted Biden. The company restored Biden to its results on Thursday.
“There was a brief data error in our knowledge graph,” a company spokesperson said in an emailed statement to CNBC on Thursday. A knowledge graph is a broad term used to describe a system that holds connected information. “We identified the root cause and resolved it quickly.”
Google’s search results for “United States Presidents” omitted President Joe Biden, who ended his four-year term Monday.
The mistake comes after Google CEO Sundar Pichai sent a memo to employees on Election Day in November, asking them to remember that people turn to the company’s services for “high-quality and reliable information.”
“Whomever the voters entrust, let’s remember the role we play at work, through the products we build and as a business: to be a trusted source of information to people of every background and belief,” Pichai wrote. “We will and must maintain that.”
Google’s Biden omission error comes as the company undergoes a turbulent period that has included several product mishaps and global scrutiny.
“It’s not lost on me that we are facing scrutiny across the world,” Pichai said in a December all-hands meeting first reported by CNBC. “It comes with our size and success. It’s part of a broader trend where tech is now impacting society at scale.”
Amid a year of product mistakes, Google launched Imagen 2, which turned user prompts into artificial intelligence-generated images. Immediately after it was introduced, the product came under scrutiny for historical inaccuracies discovered by users. The company pulled the feature for months before relaunching it, and Pichai told employees the company had “offended our users and shown bias.”
Google also faced problems with its AI summaries product AI Overview atop Google’s traditional search results, where users were also quick to find problems upon that launch.
Pichai has been among tech CEOs getting closer to Trump, who has previously alleged that Google intentionally buried search results of him. Those allegations are unproven.
Google donated $1 million to Trump’s inauguration fund, becoming one of several tech companies working to curry favor with the new administration. Pichai had a prominent standing position on stage alongside other tech CEOs at Trump’s inauguration Monday.
A sign is posted in front of Electronic Arts (EA) headquarters on March 30, 2023 in Redwood City, California. Video game maker Electronic Arts announced plans to cut 6 percent of its nearly 13,000 person workforce.
Justin Sullivan | Getty Images
Shares of Electronic Arts headed for their steepest drop since 1999 after the video game publisher cut its full-year bookings guidance, due mostly to challenges with its soccer franchise.
The stock plummeted 19% to $115.86 as of mid-day on Thursday. That would be its worst day on the market since the dot-com bubble and the stock’s third-biggest drop since EA’s public market debut in 1990.
For the fiscal third quarter, which ended Dec. 31, EA said late Wednesday that it expects to report about $2.215 billion in net bookings, versus previous guidance of $2.4 billion to $2.55 billion. Revenue in the December quarter was about $1.88 billion, with $1.11 in diluted earnings per share, the company said in a statement.
EA said that “Dragon Age” and its EA Sports FC franchise “underperformed our net bookings expectations.”
“Weakness has been seen largely from the Global Football franchises,” analysts at Roth MKM wrote in a report on Thursday, calling the earnings pre-announcement a “big stumble.” They have the equivalent of a hold rating on the stock.
EA said it expects net bookings for the full fiscal year, ending March 31, of between $7 billion and $7.15 billion, below previous guidance of $7.5 billion to $7.8 billion. EA says net bookings include physical game sales as well as revenue from online games.
The warning points to weakness in the most prominent soccer video game franchise since 1993. It used to fall under the FIFA branding, but in 2022 EA’s deal with FIFA ended and the last two EA soccer games have been sold as EA Sports FC.
The company also said that role-playing game “Dragon Age” had 1.5 million players during the quarter, which was about 50% below its expectations.
EA said it expects Global Football sales to be down on a year-over-year basis, and said that bookings from online sales, or live services, would also decline in fiscal 2025. The company’s soccer franchise, accounted for the majority of the live services shortfall.
EA plans to release full third-quarter results on Feb. 4.
The U.S. may have led China in the artificial intelligence race for the past decade, according to Alexandr Wang, CEO of Scale AI, but on Christmas Day, everything changed.
Wang, whose company provides training data to key AI players including OpenAI, Google and Meta, said Thursday at the World Economic Forum in Davos, Switzerland, that DeepSeek, the leading Chinese AI lab, released an “earth-shattering model” on Christmas Day, then followed it up with a powerful reasoning-focused AI model, DeepSeek-R1, which competes with OpenAI’s recently released o1 model.
“What we’ve found is that DeepSeek … is the top performing, or roughly on par with the best American models,” Wang said.
In an interview with CNBC, Wang described the artificial intelligence race between the U.S. and China as an “AI war,” adding that he believes China has significantly more Nvidia H100 GPUs — AI chips that are widely used to build leading powerful AI models — than people may think, especially considering U.S. export controls.
Wang also said he believes the AI sector will reach a trillion dollars, on par with estimates that the generative AI market is poised to top $1 trillion in revenue within a decade.
“The United States is going to need a huge amount of computational capacity, a huge amount of infrastructure,” Wang said, later adding, “We need to unleash U.S. energy to enable this AI boom.”
Earlier this week, President Donald Trump announced a joint venture with OpenAI, Oracle and SoftBank to invest billions of dollars in U.S. AI infrastructure. The project, Stargate, was unveiled at the White House by Trump, SoftBank CEO Masayoshi Son, Oracle co-founder Larry Ellison and OpenAI CEO Sam Altman. Key initial technology partners will include Microsoft, Nvidia and Oracle, as well as semiconductor company Arm. They said they would invest $100 billion to start and up to $500 billion over the next four years.
In the interview Thursday, Wang said he believes that it’ll take two to four years to reach artificial general intelligence, or AGI, a widely cited but vaguely defined benchmark used in the AI sector to denote a branch of AI pursuing technology that equals or surpasses human intellect on a wide range of tasks. AGI is a hotly debated topic, with some leaders saying we’re close to attaining it and some saying it’s not possible at all. Wang said his own definition of AGI is “powerful AI systems that are able to use a computer just like you or I could … and basically be a remote worker in the most capable way.”
Anthropic, the Amazon-backed AI startup founded by ex-OpenAI research executives, ramped up its technology development throughout the past year, and in October, the startup said that its AI agents were able to use computers like humans can to complete complex tasks. Anthropic’s Computer Use capability allows its technology to interpret what’s on a computer screen, select buttons, enter text, navigate websites and execute tasks through any software and real-time internet browsing, the startup said.
The tool can “use computers in basically the same way that we do,” Jared Kaplan, Anthropic’s chief science officer, told CNBC in an interview at the time. He said it can do tasks with “tens or even hundreds of steps.”
OpenAI reportedly plans to introduce a similar feature soon.
When asked which U.S. artificial intelligence startups are leading the AI race right now, Wang said that models each have their own strengths — for instance, OpenAI’s models are great at reasoning, while Anthropic’s are great at coding.
“The space is becoming more competitive, not less competitive,” he said.
Correction: This article has been updated to correct the name of DeepSeek’s reasoning-focused AI model, DeepSeek-R1.
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