Advanced Micro Devices Inc. (NASDAQ:AMD) has teamed up with Microsoft Corp. (NASDAQ:MSFT), Meta Platforms Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) to develop a new AI accelerator standard, a move that could potentially disrupt the AI hardware market.

What Happened: The new standard, Ultra Accelerator Link, is designed to efficiently connect hundreds of AI accelerators, the chipmaker said in its second-quarter earnings call.

The partnership also includes other major tech players like Broadcom Inc. (NASDAQ:AVGO), Cisco Systems Inc. (NASDAQ:CSCO), and Hewlett Packard Enterprise Co. (NYSE:HPE), indicating broad industry support for the initiative.

During AMD's second-quarter earnings call, CEO Lisa Su highlighted the importance of this industry-wide effort. The UAL technology is based on AMD's proven Infinity Fabric, which has been a key component in the company's data center products.

The partnership comes at a time when the demand for AI computing power is surging, driven by advancements in generative AI and the development of more sophisticated models. This standardization effort could potentially lower barriers to entry in the AI hardware market and accelerate the deployment of large-scale AI systems.

For Microsoft, Meta, and Google, aligning with AMD on this standard could provide more options and flexibility in their AI infrastructure.

Why It Matters: AMD's recent second-quarter earnings report showed a notable 9% increase in revenue to $5.84 billion, surpassing expectations. The company's data center business, particularly its new AI chip, the MI300X, played a crucial role in this performance. Jim Cramer praised CEO Su for AMD's success, reinforcing investor confidence.

Moreover, AMD's results also highlighted strength in its data center revenue, defying concerns about potential order cutbacks from Microsoft and competition from NVIDIA Corp (NASDAQ:NVDA). The semiconductor stock saw a nearly 8% rise in after-hours trading following the earnings announcement.

Microsoft has also been enhancing its AI capabilities, integrating advanced models from OpenAI and hardware accelerators from both Nvidia and AMD into its Azure cloud platform. CEO Satya Nadella emphasized the importance of these advancements in maintaining a competitive edge in the AI market.

Additionally, AMD's CEO, Su, expressed optimism about the company's positioning in the AI PC market despite its underrepresentation. She highlighted the upcoming launch of Zen 5-based products for both notebooks and desktops, reinforcing AMD's commitment to innovation and competition.

Price Action: AMD shares surged 7.64% in after-hours trading, reaching $149.02, after closing Tuesday's regular session at $138.44, a decrease of 0.94%, according to Benzinga Pro data.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote