Nvidia (NVDA) Crosses Swords With AMD (AMD)

Graphics chip giant Nvidia (NVDA) has had a pretty tough year. Shares of the Santa Clara, Calif.-based company have slid 12% over the past twelve months, and plunged 35% over the past five years. However, recent reports suggest that Nvidia is poised for a steady comeback in 2013, since it has been steadily stealing market share away from Advanced Micro Devices' (AMD) share of the graphics cards market.

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Nvidia, which had been primarily known for its higher-end gaming or graphics design cards, was able to successfully infiltrate the notebook market last year. Nvidia's notebook market share rose from 49% to 66% between the third quarters of 2011 and 2012, while AMD's share plunged from 52% to 34%. Does the tale sound familiar? It should, since AMD's decline closely mirrors its loss of the CPU market to industry leader Intel (INTC) over the past two decades. Although Nvidia's Fermi cards were initially weaker (on a performance per watt perspective) than AMD's cards, Nvidia successfully retooled the designs for a mobile platform for higher power efficiency, leading to a mass adoption of its graphics chips in notebook computers. Nvidia has also pulled off similar gains against AMD in the desktop PC market, where it is still considered the de facto industry standard of modern gaming. Nvidia's PC graphics revenue is approximately double that of AMD. AMD has been working to build brand recognition for its cards, which run on ATI technology, through more robust relationships with developers and publishers. Through its "Never Settle" campaign, AMD has partnered Electronic Arts (EA), 2K Games (TTWO) and Square Enix to offer copies of their games as Crysis 3, Bioshock Infinite and Tomb Raider as part of bundles with graphic card purchases. These game bundles have proven to be quite popular with the gaming community, since the included bundles are often worth over $100 alone. Analysts believe this expensive approach will help AMD regain some market share in the desktop PC market, but it could seriously crimp margins in the long run. Nvidia has taken a different approach, by offering game credit for popular free-to-play games. This is different from AMD's approach of offering "triple A" games, which are extremely popular in the U.S. market. Free to play games, meanwhile, are more popular in overseas markets, such as China and Taiwan. By comparison, Nvidia's approach is cheaper, although it doesn't offer as much incentive to purchase its cards in the United States. But in my opinion, Nvidia doesn't need to get too aggressive - its brand is well known, it is much better funded that AMD ($3.73 billion vs. $1.00 billion in cash and short term equivalents), and has better reviewed cards with more features, such as 3D and PhysX. Nvidia and AMD have also been quick to answer each other with new graphics card offerings, such as AMD's Radeon 7790 card, which was countered by Nvidia's GeForce 650 Ti Boost card. GeForce 650 Ti Boost has been critically acclaimed by numerous gaming and technological publications on the web, and seen as a superior choice to the Radeon 7790, much to AMD's chagrin. AMD recently launched its Radeon Sky graphics cards, which analysts believe signal a war with Nvidia for cloud-based gaming optimized cards. Cloud-based gaming, which allows users on lower-end computers to stream games on high settings from services such as OnLive, is seen by many analysts to be the future of gaming. It's too early to tell how the Radeon Sky will do, but at this point in the game, the ball is still in Nvidia's court. Other News About NVDA AMD Takes The Fight To Nvidia AMD battles it out with Nvidia. AMD Goes Head-to-Head With Nvidia for Cloud Gaming Dominance With New Radeon Sky Series Will the final battle of video game hardware dominance be fought in the cloud? Other Stocks in the News Is This Retailer a Contrarian Value Play? Can Children's Place bounce back after being snowed in? What 'Made in the U.S.A.' Truly Means Is prison labor turning the world into a prison planet? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. 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Published on Apr 5, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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