Wall Street may not agree, but AMD's AI business will soar (Part-1) .

AI chips are in high demand, sending Advanced Micro Devices (NASDAQ: AMD) shares soaring in the previous year, even though the chipmaker's AI business had yet to take off in 2023. That's likely because investors didn't want to lose out on Nvidia's fast-growing market.

In 2023, tech firms bought Nvidia's GPUs to train big language models like ChatGPT, leaving AMD late to the AI hardware market. AMD managed to enter this lucrative sector, which is estimated to earn $384 billion in 2032, growing 38% annually. Last year, AMD management predicted that this area would pay off in 2024.

AMD's AI-related revenue projection for the year fell short of Wall Street's expectations. A closer look at the company's AI division shows that it might grow considerably this year.

Last October, AMD predicted $400 million in sales from its MI300 family of AI GPUs in the fourth quarter of 2023. AMD's MI300 processor series launched in December, starting its AI-related revenue climb the previous quarter.

On AMD's fourth-quarter 2023 earnings conference call, CEO Lisa Su noted, "Data Center GPU business accelerated significantly in the quarter, with revenue exceeding our $400 million expectations, driven by a faster ramp for MI300X with AI customers."

AMD claims it is deploying its MI300 Instinct data center GPUs with Microsoft, Meta Platforms, Oracle, and others. This is why Su expects AMD's data center GPU revenue to hit $3.5 billion in 2024. The $2 billion target was surpassed, showing that customers like its new chips.

According to AMD's $3.5 billion annual sales prediction for this area, its data center GPU business quarterly revenue run rate may reach approximately $900 million in 2024. This is more than quadruple AMD's data center GPU sales last quarter.

AMD's 2024 AI revenue projection fell short of analysts' $4 billion to $8 billion expectations. However, smart investors should notice that AMD boosted its AI chip revenue projection in one quarter. Since it has "made significant progress with our supply chain partners and have secured additional capacity to support upside demand," the business will likely improve its AI revenue guidance during the year.