Video Chip Wars V: AMD Strikes Back

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Yesterday, I told you that Intel (Nasdaq: INTC  ) is challenging AMD (NYSE: AMD  ) with a new product line. As backward as it might sound, the underdog has been a technology leader for some time. Today, the tables are turned sideways, because AMD is doing the same thing to NVIDIA (Nasdaq: NVDA  ) .

It's a different market this time -- graphics processors rather than the x86 chips that form the core of most computers. In that field, NVIDIA has been the clear leader for eons (in the terms of this fast-moving market segment, anyway), whether you looked at pure performance, bang for your buck, or power efficiency. But today's new product release from AMD changes at least two of those equations, according to early reviews.

The ATI Radeon HD 4870 X2 is many things: a mouthful to say, a product of AMD's troubled ATI acquisition, and a return to the dual-chip action that ATI first got into with the very, very angry Rage Fury Maxx eight years ago. Hey, if the main processor race has moved to the number of cores you can fit on one chip, then why not slap more graphics chips on one card?

This card is available today, and is the absolute fastest option available for most any game you'd care to play. Gaming freaks who want the best see the $549 price tag as an acceptable deal, and a scaled-down version with two mid-range 4850 processors will be available in a couple of weeks to take the price-to-performance crown in the intermediate segment. On top of that, Activision Blizzard (Nasdaq: ATVI  ) just signed a deal to bundle "Blizzard's best games," like World of Warcraft and the upcoming Diablo III, with ATI/AMD video cards.

So the top-performance and bang-for-the-buck prizes go to AMD again. As for power efficiency, you could use a system with two 4870 X2 cards as a space heater (750 watts of total system power under load) or practically boil water on the heat sinks (higher than 192 degrees Fahrenheit). But two out of three ain't bad, and the word of mouth should imbue lower-end cards with a nice halo effect -- and that's where most of the sales happen.

This flurry of high-quality releases could be the vitamin shot that AMD needs in order to prove that the ATI deal was worth the $5.4 billion purchase price. The graphics-and-everything-else Fusion processor, due in 2009, and its refreshed platform should reinforce that point. It's been a long time coming, but the payoff is on its way.

Further Foolishness:

Intel is a Motley Fool Inside Value selection. NVIDIA and Activision are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in AMD but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure would tell you that Intel looks better than NVIDIA today, if asked at gunpoint.

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