Advanced Micro Devices (AMD) stock has been rallying since the beginning of the year, though much of the expectations embedded into the stock has a lot to do with the chip giant’s 7nm transition, which it has successfully transitioned to with the release of the Radeon 7.
Expectations continue to trend higher when pertaining to AMD launch of its 7nm Navi graphics card line-up this year. This is an important transition point for AMD, as it will attempt to take market share away Nvidia (NVDA) and refresh its product line-up from its Vega/Polaris Architecture to its next-gen Navi based cards. Keep in mind the Radeon 7, which is a high-end GPU that released earlier in February this year is a shrunken down version of its current generation Vega graphics cards with more features and enhancements in the way of core counts, clock speeds, memory and memory bandwidth.
However, it’s also worth noting that despite the release of the Radeon 7 it hasn’t been able to deliver on performance benchmarks that would best the Nvidia RTX 2080 TI or the GTX 1080 TI in the high-end segment of the market. Though, the performance is very comparable to the GTX 1080 TI, it would take a significant overhaul in the architecture to drive further excitement in the way of performance, which would then drive revenue in AMD’s graphics segment.
This on-going narrative of difficulty with matching pound for pound against its competitive rival has been somewhat of a sore spot for AMD over the duration of its entire history. Even so, it’s not like AMD has given up, as there’s still a lot of interest heading into the Navi launch later this year.
AMD may have an edge in terms of manufacturing technologies versus Nvidia as it’s using a 7nm process versus Nvidia’s 12nm process. Even so, it hasn’t amounted to a significant enough of a performance leap to finally beat its rival in graphics performance, which was somewhat of a shocker when the benchmark results were announced in February.
To bridge the performance, there’s on-going rumors of AMD over the past week that Navi 20 will have ray-tracing capabilities, which is an important feature that would make it more comparable to Nvidia’s RTX 2080 TI. The key is whether or not, the Navi line-up will come in time this year, but many indications point to AMD releasing Navi 10 first, which will be the mid-end graphics cards, and then the higher-end Navi 20 will be released next year.
This implies that while AMD known for being competitive, it’s emphasis this year will be on mid-end graphics cards, which may help with market share. In Q4’18 JPR said that AMD lost 14.9 percentage points of market share. This is a massive drop in market share for the company, though some of it was owed to the drop-off in the cryptocurrency craze, which sent the shipments of all graphics cards considerably lower with a 40% drop in total units shipped in Q4’18. Part of this, may be driven by pricing, as Nvidia and AMD got more accustomed to charging higher prices, because consumers would actually pay more for GPUs due to the prospects of making profits from mining various cryptocurrencies.
However, the drop in GPU shipments took a massive graphics industry toll, and more notably a bigger chunk out of AMD’s sales given the significant drop in market share witnessed over the course of 12-months. Hence, the introduction of Navi 10 GPUs with an emphasis on mid-end PC gaming would return us back to industry roots where consumers can finally afford a decent GPU to play video games at price points rumored to range from $200 to $400 and with a meaningful performance boost that will make it comparable to Vega 56 and Vega 64 cards leading to some heightened competition with Nvidia in the mid-end of the segment where they could lead with prior-generation high-end performance at the mid-end of the market.
This could easily drive market share back to 30% versus Nvidia, as AMD’s offerings in the mid-end tends to appeal more to consumers who want to game on a budget, and when it’s packaged in a format that would make higher-end gaming more readily accessible, it’ll definitely take a chunk out of shipments from Nvidia, which is much needed currently.
Disclosure: The author has no positions in AMD or NVDA.
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