Here’s Why AMD Is a Strong Sell

AMD (AMD) has outperformed its rivals market by a wide margin this year mainly due to the launch of its new Polaris architecture. However, the company’s weak competitive position compared to its peers like NVIDIA (NVDA) is a major problem. And due to this, the company will struggle to maintain its momentum going forward.

In this semiconductor sector, performance, technological upgrades, and pricing power play a very significant role to survive in the industry, and AMD lags its rivals in these divisions.
Moreover, the company’s foremost rivals NVIDIA and Intel (INTC) have strong free cash flow.

This clearly means that both the rival companies can handle massive R&D expenses, but same is not the case with AMD. As a result, it becomes difficult for the company to differentiate its products.

For instance, AMD launched its new graphics cards Radeon RX 480 based on Polaris architecture primarily for mainstream users as it was priced at just $199. This was a smart move by the company, but it only took a couple of weeks for NVIDIA to answer back by introducing its new GTX 1060 Pascal based graphics card priced at just $249.

Initially, RX 480 perceives good reviews, but later it was found that the card was drawing over power from the PCIe slots, and resulted in fried motherboard.
Here’s Why AMD Is a Strong Sell
Image by MarciRabo / Pixabay
The company fixed this problem by an updated driver, but the customer’s first impression regarding RX 480 was already stained.

On top of this, it was found that NVIDIA’s GTX 1060 is actually 11 percent faster compared to RX 480, with 15 percent higher all-around performance. Due to this, AMD will likely lose out on any advantage it had as majority of the gamers are likely to pay $50 more for GTX 1060, which has 50 percent more RAM.

Apart from this, recently, NVIDIA also launched its new 3GB variant of GTX 1060 available for $199 to directly compete with AMD’s RX 480. However, the performance of this new variant cannot be exactly predicted, but NVIDIA claims that it is around 10 percent faster than the AMD’s 8GB version of RX480.

NVIDIA has a proven record of delivering great products, so I wouldn’t doubt the company’s claims. AMD, on the other hand, has a reputation of over-promising and under-delivering. Given the track records of both the companies, AMD’s chances of beating NVIDIA and justifying its recent rally are pretty slim. Thus, I think the stock is a strong sell at this point in time.
Published on Aug 31, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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