AI sector now sees revenue growth through inference applications, not just model building – analyst

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Matthew Bryson, managing director of Research at Wedbush Securities, expressed cautious optimism about AMD’s (AMD [https://seekingalpha.com/symbol/AMD]) growth prospects while highlighting the broader AI sector’s shift toward revenue generation through inference applications.

According to an interview by CNBC, while AMD (AMD [https://seekingalpha.com/symbol/AMD]) has historically met projected numbers, execution timing remains a key concern across the AI industry (ARTY [https://seekingalpha.com/symbol/ARTY]), (AIQ [https://seekingalpha.com/symbol/AIQ]), (AIEQ [https://seekingalpha.com/symbol/AIEQ]).

“My only concern is AI has proven really difficult,” Bryson said.

The strategist pointed to examples like AMD’s (AMD [https://seekingalpha.com/symbol/AMD]) MI250 graphic cards, which took longer to ramp up than anticipated, and even NVIDIA’s (NVDA [https://seekingalpha.com/symbol/NVDA]) Blackwell GPU, which experienced less smooth transitions than expected.

When addressing concerns about debt financing in AI infrastructure investments, Bryson emphasized that debt becomes problematic only when companies cannot generate sufficient revenue and profit. He noted a significant shift in the AI landscape over recent months.

“What we’ve started to see over the last three, four months is that there’s been a huge increase in inference,” he said.

This increase in inference – the applications that drive actual revenue for cloud providers and model builders – represents a critical development for the sector.

“It feels like right now we’re also seeing monetization of AI, and that was the concern,” he added. “If you’d asked me 12 months ago, where’s the revenue going to come from? All we’re seeing is model building, and now it looks like we’re not. We’re seeing applications.”

Regarding competition between AMD (AMD [https://seekingalpha.com/symbol/AMD]) and NVIDIA (NVDA [https://seekingalpha.com/symbol/NVDA]), the analyst suggested AMD (AMD [https://seekingalpha.com/symbol/AMD]) has the best chance to become “a legitimate second source” in the AI chip market.

With AMD (AMD [https://seekingalpha.com/symbol/AMD]) trading at approximately 50x forward earnings compared to NVIDIA’s 33x, Bryson concluded that if AMD can achieve its stated goals of 35% growth and double-digit market share, “they’re going to grow really, really fast.”

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