Dana Point, California - On September 26, Dr. Lisa Su, Chair and CMO of AMD, delivered a keynote address at Vox Media's 2023 Code Conference held at The Ritz-Carlton, Laguna Niguel. The event showcased the latest developments in Internet infrastructure stocks, highlighting the companies that provide essential hardware and software supporting the Internet ecosystem.
Throughout the year, the Internet infrastructure theme has shown resilience, with a 7% year-to-date increase, slightly outperforming the Nasdaq 100. This positive trend follows a robust 2023, where the theme surged by 66% over the year.
One of the key drivers of growth in the infrastructure sector is the rising demand for generative artificial intelligence, fueled by the success of OpenAI's ChatGPT bot. This trend has led to increased interest in accelerated computing chips and GPUs, benefiting companies like Nvidia and AMD. In Q4 2023, Nvidia reported a remarkable 265% revenue increase compared to the previous year, with a focus on meeting the demand for AI workloads.
Memory manufacturers such as Micron are also experiencing a surge in demand for faster and higher-density chips, particularly in DDR5 and high-bandwidth memory products. Additionally, the memory market anticipates improved DRAM prices as major manufacturers adjust production levels.
While networking players like Cisco have seen sales growth in 2023 due to supply chain improvements, recent guidance adjustments reflect softer demand from telecommunications and cable service providers.
AMD stock has demonstrated significant volatility, with an 85% increase from early 2021 to the current level of around $165. Despite fluctuations, AMD has outperformed the S&P 500 over the past three years, showcasing returns of 57% in 2021, -55% in 2022, and 128% in 2023.
Looking ahead, the Internet infrastructure theme faces uncertainties in the macroeconomic environment, including high oil prices and elevated interest rates. While the long-term outlook remains positive due to the ongoing digitization trend, current valuations suggest a less attractive risk-to-reward ratio in the near term.
Among the stocks in the theme, Nvidia has been a standout performer, with a 220% increase in the past 12 months driven by strong demand for graphics processing units in the AI sector. Conversely, Cisco has experienced a slight decline of about 3% over the same period.
