Microsoft to deploy AMD's new Helios AI system in its data centers, lifting AMD's stock over 3%

AMD’s stock increased by almost 5% on Monday following the chip company’s announcement that it and Microsoft were strengthening their business partnership, with Microsoft agreeing to integrate AMD’s new rack-scale AI technology into its data centers.

Investors now have more motivation to support AMD as a legitimate rival since the move is perceived as a direct challenge to Nvidia’s hegemony in the data center processor market.

AMD is preparing to release Helios, its first rack-scale AI system, to a list of clients that now includes Microsoft, after spending around ten years trying to regain its relevance.

Additionally, the system is the first significant substitute for Nvidia’s Grace Blackwell and Vera Rubin products, placing AMD in direct rivalry with the most valuable chipmaker in the world for the first time in years.

As of right now, AMD shares are trading at around $512, up from a previous close of $495.76.

What the deal covers

Microsoft said on Monday that it will implement the AMD Helios Rackscale Solution throughout its data centers, where it will manage frontier model AI tasks for Azure AI services, Microsoft, and its AI clients.

Additionally, two new virtual machine lines powered by AMD’s EPYC processors will be introduced by Azure, Microsoft’s cloud computing division.

One line is intended for agentic AI and data pipelines, while the other is designed for semiconductor design work.

Additionally, the business is using AMD’s Pensando Data Processing Units more frequently.

AMD stated that it will begin supplying the system to Microsoft and other buyers later this year, although it did not disclose the precise financial conditions or the quantity of the compute order.

“Through our collaboration with AMD, we are expanding the Azure infrastructure portfolio with AMD Helios to give customers the performance, scale and choice they need to build and run the next generation of AI applications,” said Microsoft chairman and CEO Satya Nadella.

AMD’s CEO Lisa Su also commented on the deal, saying: “Excited to expand our partnership with @Azure to deploy @AMD Helios with our newest MI455X GPUs, Venice CPUs, and Pensando networking.”

Tata Consultancy Services, the biggest IT company in India, Meta, OpenAI, Oracle, and Microsoft are among the early adopters vying for as much processing power as possible.

According to AMD, eight of the top ten AI firms are currently using its Instinct GPUs.

Microsoft, like the others, is increasingly in need of processing capacity, especially as it advances the creation of its own AI models and increases research expenditures.

Helios combines EPYC Venice processors, Pensando networking hardware, ROCm software, and AMD’s Instinct MI455X GPUs.

It is intended to manage extensive AI training and inference tasks as an open, integrated platform.

Lisa Su said Helios carries “significant benefits” over Nvidia’s rack systems “when you’re talking about inference and when you’re talking about memory bandwidth and memory capabilities.”

AMD has not spoken about pricing, but research firm Futurum Group has put the likely cost of Helios somewhere between $5 million and $5.5 million per rack.

By comparison, estimates for Nvidia’s second-generation rack system, Vera Rubin, run between $3.5 million and $4 million.

AMD’s challenge to Nvidia’s grip on the market

According to Futurum Group, Nvidia currently holds over 95% of the market for data center GPUs. AMD is currently at about 4.5%.

However, Futurum Group CEO and analyst Daniel Newman thinks Helios might significantly change those figures. “I believe there is a significant instance where AMD performs exceptionally well and can reach 20% and 25%. He said, “This is hundreds of billions of dollars in revenue, by the way.”

In response, Wall Street expressed some hope.

KeyBanc maintained its price objective of $725 and its Overweight rating on AMD stock, indicating greater guidance and anticipated better results due to the demand for server processors and artificial intelligence.

William Blair began his coverage of AMD independently with a Market Perform rating, pointing out the company’s expanding potential in AI infrastructure as demand for both GPUs and CPUs keeps rising.