Should You Be Watching AMD?

Few companies are as hotly debated across the financial world as Advanced Micro Devices (NYSE: AMD  ) . The company is a perennial small fry, always chasing processor kingpin Intel (Nasdaq: INTC  ) . However, AMD has shown flashes of brilliance, like when it overtook Intel's technology middecade and brought the rivalry between the two to a new bitter level.

With AMD in the midst of its most ambitious processor changes in at least a half-decade, should investors be watching the company more closely? Here are several positive and negative trends to watch for at AMD in the coming months and years.

 What to watch for: The good

  • AMD's new lineup of chips is a much more ambitious processor upgrade than investors are used to. The company has long trumpeted "Fusion," its integration of powerful -- and superior relative to Intel -- graphics processors with central processors. Fusion products targeting lower-end notebooks were launched in January, while additional models targeting other areas, like high-end desktops, will be launched throughout the rest of the year. On the server side, AMD is readying chips based on its new "Bulldozer" architecture to target Intel.
  • Speaking of the server processing side, AMD has struggled to gain traction in this space. Currently, Intel controls a staggering 94% of the server market and has been gaining market share. That's unfortunate, because servers are a higher-margin business that has been a key growth driver for Intel. Key technologies like cloud computing that created "computing on-demand" functions have increased demand for server processors. At a recent investor conference, Intel forecast that sales for its server line would grow at 15% compounded growth through 2015, much higher than forecasts in desktop PCs. With its recent launch of new server chips, small gains in server market share could turn into outsized profit increases for AMD.

What to watch for: The bad

  • As much as near-term trends favor AMD, Intel still possesses the longer-term strengths within the processor market. Intel recently announced a new "Tri-Gate Technology" that could once again give it a durable advantage over AMD in the high-growth server market and also make the company more competitive in smartphones
  • Recently, AMD CEO Dirk Meyer was shown the door. While reasons for his departure aren't fully known, all signs point to a board that was upset with the company's mobile direction. AMD is currently uncompetitive in smartphones and tablets. After disappointing first-quarter figures that showed U.S. shipments of PCs were down 10%, it's clearer that AMD's lack of progress in mobile could prove to be a larger sticking point in future quarters. If mobile devices like smartphones and tablets sap PC growth, AMD will need significant market share increases against Intel in PCs and servers to continue growing.

Final thoughts
AMD has tremendous amounts of potential in the near term, but Intel's continued advantages, such as its larger R&D budget and future advanced technologies, remain. The best way to stay ahead of the opportunities and threats facing AMD is to keep up with the news surrounding the company. The Motley Fool recently introduced a free My Watchlist feature that allows users to stay ahead of the curve and receive up-to-date news on companies like AMD, or any of its competitors. To get recent AMD news and analysis, add the company to your watchlist today:

Eric Bleeker owns no shares of companies listed above. Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (6)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 26, 2011, at 8:09 PM, austec wrote:

    Uh... You Fools forgot one very important BAD:

    It has been revealed in numerous antitrust cases recently that Intel has been bribing and threatening computer manufacturers as well as retailers (like MediaMarkt) not to sell AMD-based products.

    So... Now that we know Intel even bribed Dell 6-billion dollars not to sell AMD computers, and Intel bribed and threatened HP to keep AMD's market share under 5%, we can see that Intel is too big to regulate.

    That kind of company with that type of crooked culture will always dominate.

    Invest in Intel, not AMD.

  • Report this Comment On May 26, 2011, at 8:57 PM, caromero1965 wrote:

    Correction: BOBCAT is the Fusion part that's been shipping since the beginning of the year. BULLDOZER is the new upcoming server architecture.

  • Report this Comment On May 26, 2011, at 10:34 PM, MattZN wrote:

    The problem AMD has right now is that it is well behind Intel on all fronts. Intel's SandyBridge architecture is already 30% faster and uses 30% less power than AMD's fastest offering. I run AMD's highest-end cpus and I also have a high-end Intel-i7 box and ran comparisons. AMD isn't even remotely close now.

    Intel prices their cpus at a premium but the far-reduced power consumption pays back the difference in less than 2 year. Even with a $100 difference in price AMD is no longer competitive with Intel.

    These are nearly insurmountable odds for AMD, particularly now that they have decided to no longer compete on the high-end (that's what the whole spat was about).

    The problem with Fusion is that while it is an excellent concept, Intel will have no problem whatsoever catching up to it over the next year due to their lead in fabrication technologies. Intel has a lot more chip real-estate to play with. And since integrated graphics can't beat discrete GPU cards anyway there is simply no foothold for AMD to leverage the 1-year lead they have in this area. Intel has already won the mobile wars.

    AMD has also lost its lead in the high-end server arena. Their best 12-core opteron offerings simply eat too much power to compete vs Intel's Sandybridge-based Xeons. At best AMD is relegated to a fairly narrow virtualization niche (and even then their power consumption is simply too high).

    The one advantage AMD has is that their consumer cpus can take ECC memory, making it possible to construct a low/medium-end server at a significant price advantage over Intel. This is only a small advantage though because Intel has already trumped AMD on power consumption and power consumption is at least as big a deal as ECC memory is for a server.

    So AMD is basically screwed for at least the next 2 years even with the AM3+ based cpu offerings they have in the pipeline, and longer if they don't get off their asses and compete on the high-end again.

    -Matt

  • Report this Comment On May 26, 2011, at 11:33 PM, TMFRhino wrote:

    Caromero,

    D'Oh... You're right. I'll make sure to swap "Bobcat" for "Bulldozer."

    Thanks for noting.

    -Eric

  • Report this Comment On May 27, 2011, at 10:18 AM, mtechac wrote:

    Intel is the one who is in big trouble. Intel does not have any real GPU technology that can compete with AMD or NVIDIA. Intel's GPU performance suck.

    You are comparing Intel's SandyBridge to a AMD low end laptop fusion APU. You need to compare it to Llano, which it's SandyBridge alive in multitasking and real world issues.

    Intel does not even support 1998's Microsoft DirectX 11, and even their next generation of Ivy Bridge will not support it until 2013. The latter means that all Intel machines will need NVIDIA GPU's or AMD's GPU's to ran the latest software and to ran Windows 7.

    The latest supercomputer from Cray, 50 Petaflops, uses AMD next generation server processors and NVIDIA Tesla compute engines. Intel processors don't scale.

    Intel failurs in Larrabee, Itanium, and other areas has put Intel at a disadvantage because they don't have real GPU technology to build true processors that combine the CPU and the GPU capabilities into a single high performance processing using.

    Intel will struggle to keep up in the next couple of years because besides investing billions in advertising and paying customers to not buy competitors products, it does not have much to offer in terms of APU technology.

    Why do you think Intel is stuck at around $21.00 and will not go much higher. It is because any body that knows technology knows that they are not CPU innovators, like AMD is. Remember that is was AMD the one who brought 64 bit computing, otherwise Intel will still be a dinosaur.

    I bet my money that AMD is going to take a huge chunk from Intel lack of GPU/APU technology, and the loss in the server business due to the new about to be released AMD server chips.

    I can see AMD shooting up over the next couple of years and bringing some real profit instead of being stuck with Intel, who will lose market share over the next couple of years...

  • Report this Comment On May 27, 2011, at 10:40 AM, mtechac wrote:

    (Corrected)

    Intel is the one who is in big trouble. Intel does not have any real GPU technology that can compete with AMD or NVIDIA. Intel's GPU performance suck, and it is even more than just the GPU, it is inter-GPU connectivity. i.e. crossfire, sli, etc.

    You are comparing Intel's SandyBridge to a AMD low end laptop fusion APU. You need to compare it to Llano, which eats SandyBridge alive in multitasking and real world issues, just to begin with.

    Intel does not even support 2008's Microsoft DirectX 11, and even their next generation of Ivy Bridge will not support it until 2013. The latter means that all Intel machines will need NVIDIA GPU's or AMD's GPU's to ran the latest software and to ran Windows 7.

    The latest supercomputer from Cray, with a performance of 50 Petaflops (fastest in the world), uses AMD next generation server processors and NVIDIA Tesla compute engines. Intel processors don't scale.

    Intel failures with Larrabee, Itanium, and other problems has put Intel at a real disadvantage because they don't have real GPU technology to build true processors that combine the CPU and the GPU capabilities into a single high performance processing.

    Intel will struggle to keep up in the next couple of years because besides investing billions in misleading advertising and paying customers to not buy competitors products, it does not have much to offer in terms of APU technology.

    Why do you think Intel is stuck at around $21.00 and will not go much higher. It is because any body that knows technology knows that they are not CPU innovators, like AMD is. Remember that is was AMD the one who brought 64 bit computing, otherwise Intel will still be a dinosaur.

    I bet my money that AMD is going to take a huge business chunk from Intel lack of GPU/APU technology, and the loss in the server business due to the new about to be released AMD server chips. You can bet on a company because it has good technology or you can bet in a company because it pays other companies not to buy their competitors products. The latter can just work for some time, and Intel's time is out.

    I can see AMD shooting up over the next couple of years and bringing some real profit instead of being stuck with Intel, who will lose market share over the next couple of years...

    Intels new 3d transistor technology is nothing new and although it will create more efficient Atom chips, the Atom chips are obsolete in design and their bad performance have given a bad taste to anyboty who have bought Atom based devices because they are slow and are useless..

    In addition, Intel does not even support OpenCL and other standards that are use by Apple and many other software companies.

  • Report this Comment On May 27, 2011, at 6:59 PM, TEBuddy wrote:

    AMD has nowhere to go but up, which is a great time for investors. AMD will grow, their latest Fusion processors blow Atom out of the water, hands down. The old Fusion processors were better than dual core Atom + Nvidia Ion2. Now the disparity in Intel's mobile performance is too staggering not to take notice. A CEO at AMD got ousted for missteps in mobile, maybe they should be thinking similar things at Intel.

    Sandybridge is nowhere near the total processing power of LLano, where its graphics are incredibly superior. And yet Llano, even at AMD's "obsolete" manufacturing facilities come out ahead in power consumption. I cannot believe how much consumers care about feature sizes, that they basically brag about how much Intel spends on foundries. Intel uses that because it cannot design anything better, more efficient to compete with better engineering.

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