Why Is AMD’s Deal With Google Significant?

Recently, Advanced Micro Devices (NYSE:AMD) clinched a deal with Google to supply its FirePro S9300 x2 GPU in the latter’s cloud platform. AMD’s stock price has shot by close to 30% since the announcement of this deal. This is because this deal is quite significant for AMD, as most of the big players in the cloud storage market currently use Nvidia’s GPUs. According to some sources, Google’s cloud market share stood at 8% in 2016, just behind Amazon and Microsoft. In this analysis, we further elaborate on the reasons as to why this deal is significant for AMD.

Increasing Use of GPUs In Data Centers

The application of GPUs is exponentially increasing in hyperscale data centers. Hyperscale data centers are applying deep learning algorithms to enhance their applications and make them smarter. As major tech companies further pursue their opportunities in the cloud and AI market, it will further fuel the demand for GPUs in data-centers.

It should be noted that the computation time involved in processing complex deep learning algorithms decreases significantly with the use of GPUs, as compared to a traditional CPU, due to the capability of a GPU to compute parallel instructions. Major tech companies are adopting deep learning algorithms for real time inference in applications of video processing, image processing and natural language processing.

More Wins Can Be Expected For AMD Going Ahead

Currently, almost all the major cloud companies feature a GPU by Nvidia, which has an edge over AMD of being an early entrant in the market. However, AMD seems to be quickly closing in the gap with Nvidia, as it has been able to win contracts with two of the major cloud-based service providers in the last two months — Google and Alibaba. Nevertheless, it should be noted that Google’s cloud will feature both AMD and Nvidia GPUs. Thus, there is a high chance that rest of the cloud-based service providers might follow a similar path, resulting in revenue gains for AMD. The benefit of having two suppliers for GPUs can be as follows:

• An increase in bargaining power with suppliers.
• Some customers that have a preference for high performance and for whom price is not a major factor, might prefer to have a Nvidia GPU, while others might go for an AMD GPU.

We are in the process of updating our model for AMD

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