Advanced Micro Devices (AMD) has consistently gained CPU share since the launch of Ryzen series CPUs, and indications from various sell-side checks suggests that AMD has gained market share versus Intel in laptops, and Chromebooks. However, GPU revenue might take a while to recover until the full roll-out of Vega series GPUs with Turing capable features like Ray-tracing, and AI similar to the RTX line-up for Nvidia series cards. Despite the choppy indications when pertaining to financial results, AMD is recovering from a really low base of revenues when compared to peers, and with a steady slate of products anticipated to launch in the next two-quarters, the sentiment tied to the stock could still improve from here.
Despite the mixed-implications for market share gains for AMD in Q1’19, there were a number of notable positives from a report released by Susquehanna analyst Christopher Rolland: “AMD takes share in notebooks and Chromebooks as Intel shortages likely accelerate share gains. AMD laptop share was up +3.9% quarter-on-quarter to 11.7% in Q1’19! In Chromebooks, AMD goes from almost zero market share to 8% as we believe Intel fails to supply the low-end of the market. AMD desktop share remains flat in the quarter at 15% as we wait for 7nm in 2H19. Positive AMD, negative INTC. GPU attach rate in desktops now 33% as gaming desktops increased in Q1’19. The Q1’19 GPU desktop attach rate was 33%, up +4% quarter-on-quarter, as gaming desktops increased during the quarter. Gaming desktops now make up 25% of PCs in our study (up from 20% in Q4’18). Nvidia benefited modestly from share gains in these gaming desktops (now has 76% share). Positives for NVDA and AMD.”
It seems like AMD is gaining the bulk of its CPU share in the notebook market, whereas desktop comparisons for market share remained flat between AMD and Intel. AMD’s positioning in graphics have improved modestly, as there were more gaming PCs purchased in Q1’19 than in the prior quarter. This might offset some of the cryptocurrency worries, as we’ve returned to a more normal GPU environment for desktops where gaming was the primary end-market for high performance desktop PCs. However, with the price of bitcoin recovering from $3,000 all the way up to $5,000 it wouldn’t be surprising to anticipate another crypto-mining fueled buyout of various graphics cards as new hashing algorithms, or new hashing opportunities begin to materialize in another inflated cryptocurrencies market (this could take a number of years to develop), hence the return of PC gaming demand helps.
AMD’s pricing is expected to remain flat across its CPU line-up, so revenue from the computing and graphics segment will be driven by AMD’s CPU volumes, as opposed to pricing improvements. Pricing for Ryzen processors have contributed to ASP increase, but based on the average ASP across the line-up, pricing is expected to drop from $209 to $205 representing a 1.9% drop in pricing.
There’s a decent likelihood that the gains from just notebooks and Chromebooks will translate to material upside in financial results, as the survey data indicates that the key area AMD was able to deliver shipment growth in Q1’19 was the Notebook segment where 2018 shipments of global notebook PCs were 162.3 million according to Credit Suisse estimates. So, if AMD’s market share of 11.7% were to stay consistent or improve modestly, AMD could sell 19 million notebook CPU units in 2019. Keep in mind, AMD’s market share averaged 5% in 2018 in the notebook segment or 8 million units in 2018, so this would imply that AMD’s notebook revenue will grow significantly versus prior-year.
Overall, the global PC market is expected to slow this year. Gartner and IDC both reported a 4.6% drop in global shipments to 58.5 million units in Q1’19. This paints some more headwinds for Nvidia and Intel than it does AMD, as Notebook market share gains offset the declines in the overall PC market. Whereas Nvidia and Intel could offset some of the softness tied to PC shipments due to pricing higher, this might not produce as much in the way of financial upside as investors are hoping for, but it does diminish the negatives of a weakening PC market.
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