Is AMD Killing NVIDIA?

If I were a NVIDIA (Nasdaq: NVDA  ) shareholder today (which I'm not, and never have been), I'd be shaking in my boots.

Chief rival Advanced Micro Devices (NYSE: AMD  ) , via its ATI subsidiary, has introduced a brand-new graphics chip in the market's sweet spot of less than $100, where two-thirds of all graphics-crunching chip sales happen. Early reviews overwhelmingly say that NVIDIA has nothing in its modern lineup that could compete with AMD's new chip, and the older products that could compete are too outdated and expensive to manufacture to last for long.

The Radeon 5670 is the first sub-$100 graphics product to support the version of DirectX programming that came with Microsoft's (Nasdaq: MSFT  ) Windows 7. So far, NVIDIA has no support for that technology at all. AMD's chip runs modern games faster than the closest NVIDIA equivalent, known as the GeForce 240 GT, while only slightly trailing or being equal with NVIDIA's finest low-budget chip in terms of power use, noise levels, and system temperatures.

In the words of longtime industry observer Charlie Demerjian, "ATI has no competition for the time being. NVIDIA can't match the cost, features, or anything else. ATI has a clean kill with this part." That's bad news for a company that makes more than half of its sales in the consumer graphics-chip segment. Meanwhile, NVIDIA is crossing lawsuits with Intel (Nasdaq: INTC  ) and perhaps giving up on the system chipset market that accounted for another 16% of sales in the last year. What's left? The mobile device market? I'm not sure that's good enough.

NVIDIA CEO Jen-Hsun Huang claims to have demand for more chips than he can supply, but you have to wonder how long that imbalance will last in the new competitive landscape. And this weakness comes at a very inconvenient time for NVIDIA: Market research firm Gartner says that demand for new computers is exploding worldwide, with heavy shipment increases for market leaders like Apple (Nasdaq: AAPL  ) and Hewlett-Packard (NYSE: HPQ  ) . Despite year-over-year shipment gains that substantially trailed its peers, even Dell (Nasdaq: DELL  ) showed healthy growth. It would be a shame to miss out on this exciting market opportunity because of disappointing products.

Until NVIDIA shows that it can design a cost-effective performer in this critical low-end sector, I can't help but wonder whether chip giant Intel might swoop in and buy the flailing graphics expert at long last, if the government would allow it. Intel's manufacturing expertise and massive research department could be just what NVIDIA needs in order to become a competitor again. In any case, NVIDIA’s next-generation Fermi architecture can't come soon enough for its beleaguered lineup.

That's my take. What's yours? The comments box is waiting for your input below.

Fool contributor Anders Bylund owns shares in AMD, but he holds no other position in any of the companies discussed here. Intel and Microsoft are Motley Fool Inside Value recommendations. Apple and NVIDIA are Motley Fool Stock Advisor picks. Motley Fool Options has recommended buying calls on Intel and diagonal calls on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (31) | Recommend This Article (33)

Comments from our Foolish Readers

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  • Report this Comment On January 14, 2010, at 3:59 PM, BitShifter wrote:

    Wow. Fool writers now quoting morons like Charlie Demerjian from Enquirer? epic!

  • Report this Comment On January 14, 2010, at 4:05 PM, j7777k wrote:

    Anders,

    "Charlie from SemiAccurate". This article is tainted.....

  • Report this Comment On January 14, 2010, at 4:41 PM, zubing wrote:

    "In the words of longtime industry observer Charlie Demerjian"

    What a joke :-)

  • Report this Comment On January 14, 2010, at 4:51 PM, Fool wrote:

    Argh, so much wrong in this article. First of all, go try and find a 5670 for less than $100. They are actually pricing out at in the $120-$160 range.

    Second the geforce 9800gt beats it in the benchmarks, and can be purchased for about $85-$130. The 240 misses by only a few fps in most benchmarks, and can be had for about $95-$110.

    Third, the margins on this level of card are not good for either company.

    Fourth, show me all the dx11 games that makes this important? There are 3 games. 3. And the upcoming titles or 2010 have few dx11 runners among them, and most look to be lackluster.

    Fifth, dx11, at this point in development, aren't showing many real improvements to dx10 - and cards at this level aren't likely to be able to leverage those improvements (high graphics settings in games + high resolution + AA + filtering) without slowing down to stop motion animation speeds.

    In short, do more homework.

  • Report this Comment On January 14, 2010, at 4:58 PM, Fool wrote:

    So take a look at your benchmarks for a dx11 game.

    http://www.tomshardware.com/reviews/radeon-hd-5670,2533-15.h...

    The 5670's fps CRAWLS when dx11 is turned on even at low resolutions. And that is average fps. In intense scenes it will bog down even more, and become unplayable. In short, dx11 features on a card at this level are essentially useless, even in the higher powered 5750. No gamer is going to live with those frame rates.

  • Report this Comment On January 14, 2010, at 5:51 PM, TMFRhino wrote:

    I'm not the author of this article, but I wanted to address one comment.

    "Argh, so much wrong in this article. First of all, go try and find a 5670 for less than $100. They are actually pricing out at in the $120-$160 range."

    http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&am...

    Seems like New Egg has the 512MB model for $99, am I missing something?

    -Eric Bleeker (TMFRhino)

  • Report this Comment On January 14, 2010, at 5:57 PM, drborst wrote:

    Interesting article, and some good comments. (What Charlie Demerjian writes is, as best, geek entertainment, not informed anaylsis)

    I would add that Intel won't buy NVIDIA. It would be fun to see if Intel could fab their chips (I don't think AMD ever ported ATI's chips to their fabs which Global Foundries now own, but someone might correct me if I'm wrong).

  • Report this Comment On January 14, 2010, at 6:11 PM, Fool wrote:

    I'm not the author of this article, but I wanted to address one comment.

    "Argh, so much wrong in this article. First of all, go try and find a 5670 for less than $100. They are actually pricing out at in the $120-$160 range."

    http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&am......

    Seems like New Egg has the 512MB model for $99, am I missing something?

    -Eric Bleeker (TMFRhino)

    Obviously I can't survey every seller, so I just used google's product search for comparison purposes.

    But okay, you got me :) It can be found for $99 (+$7 shipping)...even so, however, the 9800gt, which beats the 5670 in dx10 benchmarks, can be found on the same site for $75 (with free shipping). It's an ASUS card too, which are nice. And there are lots of 9800gt models between that and the $99 price point with free shipping as well.

    Combine that with the fact that the 5670 cannot maintain a 30+ minimum fps in dx11, and dx11 is useless. So the point still holds that the 9800gt is a better performer, at a lower price point. DX11 support is essentially a marketing gimmick for the 5670.

  • Report this Comment On January 14, 2010, at 6:16 PM, Weissbock wrote:

    Anders holds AMD stock _and_ quotes Charlie Demerjian? Could this possibly be more tainted?

    Motley Fool is definitely losing credibility.

  • Report this Comment On January 14, 2010, at 6:43 PM, TMFZahrim wrote:

    Okay guys, I picked Charlie's quote because it summed up the consensus from reviewers like Anandtech and Tech Report very succinctly. And DX11 might not make a huge practical difference right now, but it's a future-proofing feature that no GeForce can match today. If you're buying sub-$100 graphics cards, you might also be the kind of gamer who would be okay with running at a lower resolution than full-on 1080p HD goodness. Fermi might be good, or it could be the second coming of the Glaze 3D. That is all.

    Anders

  • Report this Comment On January 14, 2010, at 6:54 PM, Maturegeek wrote:

    Your article was right on the mark. I just bought a new video card and can tell you that I wouldn't even consider an Nvidia product. They are last generation products that require additional power to run and don't offer the newer features that I got with my ATI card (5850).

    If I were looking at a low end video card again it would have been an ATI product not some 3 year old piece of junk.

    To me it seems like this Charlie guy is right on the mark with his comments.

    Good job!

  • Report this Comment On January 14, 2010, at 8:26 PM, hazmatt87 wrote:

    The only reason the 5670 crawled in that THG Dirt2 benchmark is because it was running at ultra high details. Now I'm no graphics engineer but isn't that absurd to accuse a midrange card of giving midrange performance? The 5670 has exactly one quarter the resources (TMUs/ALUs/ROPs) of the 5870 and performs as it should.

    Even on DX9 everything below the 4770 (including the 98/9600GT, 240) would need to turn down the quality a tad to get smooth framerates for that game. I've played Dirt2 and I could feel it getting choppy in the low 40s.

    If you think you can buy a mid tier card and not expect to turn down the settings on the new games, you will be disappointed regardless whoever you bought your video card from.

  • Report this Comment On January 15, 2010, at 3:42 AM, MrGordonGekko wrote:

    As a computer scientist I can confirm that the author of the article is perfectly right with his point. Everybody who has to make a decision on buying a new grafics card or a complete computer would come to this decision at this time. But maybe there are some nvidea fans out there that come to a different conclusion.....but this would not be rational.

  • Report this Comment On January 15, 2010, at 4:09 AM, japeel wrote:

    Oh Please!

    Have you looked at the AMD financial reports, they've been making a huge loss on every unit of everything they've sold in eight out of the last ten years. The stock has been diluted to hell and back in the last year, they’re carrying tons of debt, they have negative equity. AMD spend more than twice Nvidia on research last year, but remember they have to compete in the CPU arena as well, where do you thing the cash is going hmm?

    Who then should be quaking in their boots? If you own AMD stock you own $0.8 of negative equity and an annual loss of $3 per share. If you buy today and keep your stock for three years, the company will have lost what you paid for it during that time.

    Is this really a good way to kill Nvidia? Are you kidding?

    The author talks about pricing pressure but only in the desktop market, have you seen what Nvidia are producing in the mobile arena, the Tegra2 has the equivalent graphics power of today’s top consoles. For the majority of gamers, the gaming is more of a social thing now, (hence the success of the Wii) and being on the move with high end graphics is more important than having the highest end graphics in your beige box at home.

    Nvidia, has an extremely strong brand, I won't buy AMD graphics again, simply because they let me down on vista drivers for a laptop I bought some years back leaving me with an unusable $400 OS. Their support was none existent and their drivers flakey.

    I look at AMD cards now and say, do I want the up to the minute fastest game experience on my PC? Nope, not when I have a PS3 linked up to my 42" telly, I'm just not bothered anymore. I'd much rather have an Nvidia card, that supports CUDA and PhysX, and will keep future applications working, if I have to wait another quarter or two for Fermi that’s just what I’m gonna do.

    As for the guys who do spend $500, on a graphics card, they consider themselves in the formula one of gaming, when fermi is released they will simply make that investment.

    This is a complicated market, and you simply can't make sweeping statements as you do in the above article.

  • Report this Comment On January 15, 2010, at 3:28 PM, yelloweye wrote:

    forum bots: be aware of who you are [IMG]http://s1.bild.me/bilder/012010/9124909Snap_2010.01.15_13.27...

    today's trivia... who is 2655

  • Report this Comment On January 15, 2010, at 3:32 PM, yelloweye wrote:
  • Report this Comment On January 16, 2010, at 2:56 PM, Fool wrote:

    Nvidea sucks -,-"

    ATI :D !!!!!

  • Report this Comment On January 16, 2010, at 9:19 PM, Fool wrote:
  • Report this Comment On January 17, 2010, at 9:58 AM, GaMEChld wrote:

    Definitely getting a Radeon 5970... someday... you know, when there are actually some in stock and selling for MSRP. I guess no matter what, I have to wait for Fermi which will have unknown performance, but will most definitely drive the prices for the high end stuff down a little.

    Anyway, yeah NVIDIA seems to be in a tough spot, but I don't think they are dead, nor do I hope they will die. Competition benefits us all.

    The only thing I am really hoping for, is that "Bulldozer" architecture is as good as it needs to be. AMD needs a leapfrog in cpu advancement. At the very least, they need it to out perform Nehalem.

    Hooray for technology!

  • Report this Comment On January 17, 2010, at 6:08 PM, FreeMortal wrote:

    Inflated hype.

    ATI and NVIDIA have been leapfrogging each other for over a decade, just as AMD and Intel have. The Core 2 Duo did not kill AMD in 2006, just as the Phenom 2 did not kill Intel in 2008.

    This is how the semiconductor industry works. This article gave me no usable information at all.

  • Report this Comment On January 17, 2010, at 6:58 PM, CalBubba wrote:

    Indeed, it's always been about leap-frogging, and high-end gaming isn't that interesting a market anyway.

    Intel has a serious product line hole with graphics chips for low-power, media streaming, and ATI is too closely wedded to AMD.

    The mass market for video chips is for embedded devices, phones, netbooks, and the new slates coming out this year.

  • Report this Comment On January 18, 2010, at 8:51 PM, AirForceFool wrote:

    Seriously.... a lot of you nerds have a hair up your arse, and little to do with your time then pick articles apart... sheesh... you look up some free advice, rant and rave about the smallest fact, and then when called on your call on the fact throw your hands up that you can't search the whole internet for prices. Heaven forbid you come across an article that provides you no usable information, and you follow it up with... you guessed it... no useable information... how about providing the other side of the story without attacking the author... or is that to much to ask... probably... and if credability is such an issue, why the heck are you taking the time not only to read the article, but also wasting everyone's time posted worthless comments about your feelings.

    Chris

  • Report this Comment On January 19, 2010, at 3:40 AM, 5048 wrote:

    AMD is a bad word to Silicon Valley techies.. they still think of it as Jerry Sanders joke. Meanwhile AMD has thoroughly reinvented itself and spun off the cutthroat fab business with Arab money, developed some really great chips and built marketing relationships worldwide. They didn't succeed because Intel blocked them - as proved by Intel's $1,250,000,000 payment to them and pressure from FTC that will keep Intel out for now.

    So it's finally AMD's chance to shine. Their float is 9% of Intel's - this should be a $30 stock if Intel plays nice. Just don't expect a Si Valley engineer to agree.

  • Report this Comment On January 20, 2010, at 5:41 PM, doczeke71 wrote:

    Nice spelling, Gordon Gecko. You obviously know what you're talking about. Grafics??!! Really??!!

  • Report this Comment On January 20, 2010, at 5:43 PM, doczeke71 wrote:

    One of the worst articles I've ever seen on Motley Fool!

  • Report this Comment On January 21, 2010, at 9:52 AM, roguesisland wrote:

    On January 19, 2010, at 3:40 AM, 5048 wrote:

    .... So it's finally AMD's chance to shine. Their float is 9% of Intel's - this should be a $30 stock if Intel plays nice. Just don't expect a Si Valley engineer to agree.

    You are off subject. What does AMD share price have to do with the title: Is AMD killing Nvidia?

    Because you opened up a can of worms, I will add my 2¢ worth. What should Intel's share price be? $125 ps? Considering their tick tock growth plan, cash/dividends AND cash flow, your assumption about AMD may be correct.

  • Report this Comment On January 21, 2010, at 11:21 AM, Gaode wrote:

    After reading this article on Motley Fool about how bad NVDA is compared to AMD or ATI respectively I have only one thought bothering me: Why is NVDA then a recommendation in the Motley Fool Stock Advisor???

  • Report this Comment On January 21, 2010, at 1:38 PM, TMFEditorsDesk wrote:

    Hi Gaode,

    On the site the writers are allowed to express their own opinions, their view doesn't match that of Stock Advisor. The analysts at Stock Advisor would have differing views on many of the points presented above.

    Best,

    Eric

  • Report this Comment On January 21, 2010, at 2:33 PM, mpendragon wrote:

    I'm more interested in Nvidia's work with the Tegra chipset for mobile devices. Margins on desktop PCs and notebooks are slim outside of Apple. Console gaming is seriously eating into PC gaming these days and consoles tend to treat the hardware as a loss leader with the exception of the Wii but that's also much cheaper hardware than the competition uses.

    I think the area of growth going forward for chip manufacturers is in chips with high performance relative to power on platforms with batteries like smart phones, netbooks or similar, tablets, ebook readers, etc. and I believe Nvidia is in a good place to take advantage of that.

  • Report this Comment On January 22, 2010, at 3:56 PM, Roosters2006 wrote:

    Is anyone else annoyed that TMF recommends a stock for its members to buy, and then releases an article saying that the company sells outdated products and its main competitor is going to eat its lunch? Doesn't build a lot of trust in SA recommendations when the company making the recommendation is arguing against itself.

  • Report this Comment On January 24, 2010, at 12:05 AM, DarylDad wrote:

    I agree that Nvidia was recommended as a SA and I believe it is also involved in Wall Street trading and transactions. Nvidia stock pick with Tom or David. Time will tell.

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