Should NVIDIA Bulls Worry About AMD's Mantle?

As an NVIDIA (NASDAQ: NVDA  ) shareholder for about a year now, it has been a rewarding experience to see the shares be driven meaningfully higher. It has always been clear that the company is run by an excellent management team and develops truly world-class graphics processors and accompanying software. That being said, a lot has been made of rival Advanced Micro Devices' (NYSE: AMD  ) recent launch of its Mantle API, and many in the investment community seem to think that AMD is poised to regain meaningful share in the discrete GPU market. Should NVIDIA's shareholders be worried?

Some technical background
In order to write programs that utilize a graphics processor, a programmer must use a library of functions (think of these as commands) that act as an intermediary between the program and the underlying graphics processor. These libraries, known as application programming interfaces, or APIs, are required so that programmers don't need to write special code for each type of graphics processor out there. The upside is that this makes life a lot easier for programmers, but the downside is that the overhead introduced by these APIs comes at the cost of some performance.

The two major PC graphics APIs in use today are OpenGL, managed by the Khronos Group, and Microsoft's (NASDAQ: MSFT  ) DirectX. The ease of use and flexibility of DirectX (after a few disastrous iterations) was one of the key reasons that Microsoft was able to establish Windows as the gaming platform of choice, as DirectX was Windows-only. So, AMD took it upon itself to introduce yet another graphics API -- known as Mantle.

Mantle looks interesting...
AMD's Mantle programming interface promises to be a much "closer-to-the metal" API -- that is, developers can build games with it that can access the hardware with far less overhead, thereby improving performance. Apparently AMD has already gotten the attention of key developers, such as Electronic Arts and Activision-Blizzard, with promises that more support should be announced during the coming months. If such support becomes more widespread, then AMD's graphics cards could have a legitimate performance advantage in a number of games.

What of NVIDIA?
While the above may seem like doom and gloom for NVIDIA, keep in mind that the company still has a number of key advantages. First and foremost, AMD's graphics division is barely profitable -- particularly as excessive game bundles tend to eat into profitability -- while NVIDIA's is raking in the dough. Further, while NVIDIA's consumer GPU business is important, its professional workstation and HPC cards, known as Quadro and Tesla, are the real cash cows. Despite grandiose theoretical performance claims from AMD with respect to high-performance computing, NVIDIA's CUDA parallel computing platform is the gold standard in HPC with about 90% of the HPC accelerator market. NVIDIA also owns the lion's share of the workstation GPU market, which is where the real money is made in the discrete GPU business. 

Further, NVIDIA is the clear market segment share leader in discrete PC graphics, particularly in laptops. This success has been largely due to superior brand equity, coupled with a much more robust technology -- called Optimus -- for switching between integrated and discrete graphics to maximize battery life. AMD's competing technology, Enduro, is still not quite up to speed. As a result of this significant market share, coupled with NVIDIA's superb developer relations, it is not at all clear that most developers will be so keen to spend the extra time and money to develop separate code paths for the smaller player in the space. The entire point of OpenGL/DirectX is to make the developers' lives easier.

Finally, while not anywhere nearly as publicized, NVIDIA actually has its own closer-to-the-metal SDK called NVAPI that exposes the GPU more directly to game developers in a manner very similar to what AMD's Mantle does. It is likely that in the wake of the Mantle hype, NVIDIA may begin to push its NVAPI more aggressively. 

The Foolish bottom line
While AMD is wonderful at making bold promises, the reality of the situation is that its GPU market share is still dwarfed by NVIDIA's, and its operating profit more so. Mantle is certainly an interesting technology, and and there has been a lot of initial cheering from a number of developers. But it remains to be seen how big of a deal it ultimately turns out to be in driving meaningful share gains for AMD in the GPU space and -- more importantly -- higher operating profit. After all, a company can give away only so many free games in a bid to gain share before investors start asking about these things called "profits," which, coincidentally enough, NVIDIA has been able to generate in spades. 

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  • Report this Comment On October 09, 2013, at 1:43 AM, opto50 wrote:

    AMD's release of Mantle along with the intro of the new price performance leader R9-280X graphics card along with the upcoming R9-290X and 290 cards that also outperform Nvidia counterparts are just one part of the equation.

    The new introductions and their equivalent FirePro models will significantly reinforce AMD design wins with consumer and workstation graphics in the upcoming Apple Mac Pros, HP, Dell, Lenovo and numerous other OEMs.

    Additionally the expanding rollout of accelerated graphics/compute software from Adobe, Autodesk, Microsoft, Sony, Corel, LuxRender, Roxio, Cyberlink, Arcsoft, Magix, Handbrake, WinZip and many others will allow users to realize the great potential of their AMD graphics and APU based systems.

    Note the words "APU" in the previous sentence because it is COMPLETELY MISSING from the author's "analysis" of market share of AMD versus Nvidia. AMD's GCN APU (graphics core next based accelerated processing unit) market will be expanding from next generation gaming consoles that will be in millions of homes to high performance compute servers.

    Perhaps it is fitting that the author is blind to APUs, because when AMD's next generation Steamroller GCN Kaveri created on 28nm silicon arrives in the next eight weeks or so, it will likely take away the majority of the discrete and mobile revenue from Nvidia over the next year.

    AMD Kaveri's HSA design is compelling enough, but the addition of software accelerated through Mantle will be devastating to both Nvidia and Intel.

  • Report this Comment On October 09, 2013, at 3:30 AM, rav55 wrote:

    AMD Mantle is the least of nVidia's worries.

    In about 3 years nVidia will loose a quarter billion a year due to the Intel vs nVidia settlement agreement closing.

    In about 3 years Intel will stop support of PCIe. Oak Trail does not support PCIe now and Intel was allowed by the SEC to ship it as it was alredy in the pipe at the time. However the FTC order to to Intel to maintain PCIe expires in 2016.

    Intel has already established that it does not want to allow access to Intel processors by nVidia. Or nVidia would not have sued them for access and for poaching tech for Sandy Bridge.

    Intel fully intends to go it alone in the IG CPU as well as the discrete GPU. nVidia does nothing to enhance or increase Intel sales.

    AMD Mantle is not the brick wall that nVidia is going to hit in 2016.

    You can argue all that you want that I am wrong and who knows, I might be, BUT the FTC did order Intel to maintain support for PCIe. In 2 years mid price range discrete GPU will be barely competitve with AMD APU or Intel IG-CPU. The mid price range is probably 80% of the market.

    And it is highly doubtful that the SEC will allow Intel to acquire nVidia either. For the same reason that they shot down the AT&T acquisition of T-Mobile.

  • Report this Comment On October 09, 2013, at 1:20 PM, spyqqqdia wrote:

    In 2-3 years time tegra6 will be a Cuda enabled processor most likely scoring 8000-10000 in integer and floating point Geekbench.

    I will be able to compile C++ reasonably fast on the thing. It will run Linux, R, Python reasonably fast.

    A small tablet will cover all my and most consumers

    computing needs.

    At that time Intel will have a problem.

  • Report this Comment On January 05, 2014, at 1:49 PM, DieInSente wrote:

    It's now almost 3 months since the "launch" of the Mantle API, and it is still not openly available to developers. This is not a good sign. If you go to the amd.com developer's site there is no SDK, no documentation, no technical information, only marketing hype.

    Interesting that Ashraf used the phrase "closer-to-the-metal". Close-to-The-Metal, or CTM was another API that AMD announced years ago (for gpgpu computing like Cuda), but only gave to a few selected developers under NDA in a closed beta, and then quietly killed because it was an unusable mess.

    Its too early to tell if Mantle will turn out to be a real thing, or just FUD and vaporware like CTM, but the long delay in making the API public shifts the odds in favor of the latter.

    [Disclosure: I own significant positions in both AMD and NVIDIA]

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