Tianfeng International: AMD's price increase helps NVIDIA reach new highs?

According to Zhitong Finance APP, Tianfeng International stated that amidst the intense competition in the AI chip market, a pricing adjustment announcement from AMD (AMD.US) has caused a stir in the industry. AMD is considering raising the average price of its Instinct MI350 series AI chips from $15,000 to $25,000, an increase of up to 70%. Following the news, AMD's stock price rose by 4.32% on Monday, continuing to reach a historic high after the close, seemingly indicating that the market is currently only selecting information that is favorable for stock prices, disregarding the negative aspects.

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Recently, AMD's CEO Lisa Su mentioned that the chips procured from TSMC's new factory in Arizona will cost 5% to 20% more than similar chips produced in Taiwan. Despite the higher costs, the company believes that this move aims to diversify the supply of critical chips and enhance the resilience of the supply chain, making the cost acceptable.

Additionally, Su revealed that the chip yield at the Arizona factory has reached parity with that of the Taiwan factory, and AMD expects to receive its first batch of chips manufactured in the U.S. by the end of this year. This means that AMD will essentially not be affected by semiconductor import tariffs and may even benefit from competitors' declines.

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In this regard, HSBC expects AMD's revenue from AI chips to reach $15.1 billion by 2026, a significant increase from the previous estimate of $9.6 billion. This forecast not only reflects the strong growth in market demand for AI computing but also indicates that AMD's market share in the AI sector is likely to expand further. As various industries deepen their reliance on AI technology, the demand for high-performance computing solutions is increasing, and AMD's MI350 series perfectly meets this market trend.

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It can be said that although NVIDIA holds a leading position in the AI chip market, AMD is gradually narrowing the gap with its competitors through continuous technological innovation and market strategies. However, it should be noted that this is not a newly emerging technological route; similar implementation methods were researched in the industry before the AI boom. The reason the industry still primarily adopts the CoWoS route is because:

1. To directly fan out fine-pitch bare chips to PCB substrates, more intermediate layers are needed for assurance, resulting in higher costs; 2) The mismatch in thermal expansion coefficients and yield between the intermediate layer (Si) and PCB (resin, electronic cloth, copper foil, etc.) requires technical breakthroughs; 3) Directly integrating chips onto the PCB can lead to increased overall yield control and failure costs. For example, a cheap PCB failure could very likely cause a more expensive computing chip to malfunction, thereby amplifying the actual usage cost of the entire system. Therefore, relatively speaking, although the current capacity of ABF substrates is still in short supply, the overall solution is still cheaper than direct integration onto the PCB.

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Tianfeng International stated that overall, AMD's price increase for AI chips is interpreted by the market as the company being optimistic about its substitution effect for NVIDIA's (NVDA.US) B200 chip. Interestingly, while AMD reached a new high for the year, the theoretically affected NVIDIA also continued to set historical highs. The market's behavior of "seeing joy but not worry" is a typical sign of emotional overheating. Although CoWoP can reduce losses and improve heat dissipation efficiency, it imposes higher requirements on yield control and cost control for PCB boards, thus falling short compared to the CoWoS solution. From a technical perspective, domestic PCB manufacturers indeed have the motivation to overtake through the CoWoP solution, but achieving large-scale implementation within the next 2-3 years will be difficult. The market pricing has already begun to exhibit overly optimistic characteristics