Should You Give up on Advanced Micro Devices' Turnaround?

2015 was a very volatile year for Advanced Micro Devices (AMD), as the company’s stock price went down around 41 percent, whereas its foremost rival NVIDIA (NVDA) was up almost 18 percent. In 2015, Advanced Micro Devices lost almost every single battle against Intel and NVIDIA. In terms of graphics cards, the company somehow managed to get only 20 percent market share while rest 80 percent market share belonged to NVIDIA.

Due to the market volatility, both the companies are off to a rough start to 2016.
That being said, I reckon there will be lot of game changing improvements this year. But it is yet to be seen if Advanced Micro Devices’ new forthcoming products will have enough potential to snatch market share from NVIDIA. Improving market share will certainly help Advanced Micro Devices enhance its balance sheet and can be a long-term tailwind. However, if the recent past is an indicator, the chances of that happening are pretty low.

Advanced Micro Devices is on its way to introduce its new graphics card based on Polaris architecture. The company’s Pascal architecture looks quite interesting, as first of all, it will be grounded on new Samsung’s 14 nanometre LPP process node, and secondly, it will adopt a new architecture with approximately 2X of transistors. Apart from this, it will also adopt HBM2.0 for the high-end graphics and GDDR5X for the low-end as well as mid-end graphics.

However, the main issue is that Advanced Micro Devices is not alone in the game and faces competition from NVIDIA again. NVIDIA is also on its way to launch new products based on Pascal architecture featuring similar process node (16 nanometre FF + TSMC), HBM2.0 for its high-end graphics cards. This new architecture will also deliver huge enhancements for the smartphones, as it has the facility to calculate every FP16 calculation at twice the speed of FP32. Therefore, NVIDIA’s Pascal architecture will prove to be a tough competitor for Advanced Micro Devices’ Polaris architecture.

Final Words

Given the recent history, I wouldn’t bet against NVIDIA getting the better of Advanced Micro Devices yet again. The company has struggled to hold onto its market share and has been outwitted by NVIDIA time and again. Due to this reason, I think investors should stay away from Advanced Micro Devices until it starts showing progress. The stock will likely remain depressed since the chances of it outfoxing NVIDIA are pretty low.
Published on Feb 16, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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