When Advanced Micro Devices (NASDAQ:AMD) reported its third-quarter earnings, the focus was on its return to profitability, driven largely by the ramp-up of next-generation game consoles. However, what stood out to this Fool was the performance of the non-game console portion of AMD's graphics division. In particular, while the firm's professional graphics cards saw record-high revenues, its GPU ASPs were down, and its GPU revenue was down sequentially. AMD claims that this is due to customers transitioning to its next-generation products, but it raises the question: Did NVIDIA (NASDAQ:NVDA) -- AMD's chief competitor in discrete GPUs -- gain more market share in the third quarter?
In notebooks, the answer is probably "yes"
In the notebook space, NVIDIA has typically dominated AMD. While AMD's GPU hardware is actually quite powerful, NVIDIA's relationships with the PC OEMs are stronger and its brand awareness among gaming enthusiasts is generally considered better than AMD's, although this is a pretty subjective claim. More importantly, though, NVIDIA's Optimus technology -- the software stack that allows the discrete GPU to power down in non-gaming situations -- is generally considered to work better.
At the end of the day, though, the proof is in the pudding. According to NVIDIA's Rene Haas, the company scored "over 95% of the gaming notebooks" for the Intel (NASDAQ:INTC) Haswell generation of gaming notebooks -- the fourth-generation Core architecture -- that began rolling out in June. This is important because AMD's notebook offerings, particularly for gamers, are not competitive on the CPU side. So, the attach rate to Intel platforms is critical. It seems likely, then, as these designs begin to ramp up, that NVIDIA's share in the notebook space should continue to increase.
In desktops, the answer is trickier
While it's pretty clear that NVIDIA owns the mobile discrete GPU space, the question becomes much more subtle when we begin to talk about the desktop market. In this space, NVIDIA can still leverage its brand, but the Optimus advantage largely goes away. One advantage that the very high-end gamers see with NVIDIA cards over AMD's is that in multiple GPU configurations (that is, when gamers put multiple graphics cards in a system to work together), NVIDIA's frame times have traditionally been much smoother. AMD's latest drivers -- the software that allows programs to talk to the GPUs -- have gotten much better here, but according to AnandTech, NVIDIA still has an advantage.
So, the market is highly competitive, and both AMD and NVIDIA have excellent products. But AMD is willing to price more aggressively and sacrifice margin to gain share. Also, AMD's latest high-end R9-290X features a smaller die size than NVIDIA's highest-end GK110 core (found in GTX 780 and Titan), which means that AMD may actually have pricing power at the very high end if it wants to get aggressive.
So, with respect to desktop GPUs, it seems likely that due to the product transition hampering AMD's sales, NVIDIA gained share, but the more interesting question will be how the fourth quarter ends up looking.
Foolish bottom line
It is likely that NVIDIA gained more GPU share during the third quarter as a result of a strong pipeline of Haswell-notebook design wins as well as a stronger desktop lineup than what AMD had for most of the quarter. However, while it's likely that NVIDIA's mobile strength will continue in the fourth quarter (i.e. more share gains), it's likely that AMD could gain desktop share as it competes on price, game bundles, and a compelling product refresh. But one thing's for certain: NVIDIA won't make it easy.
Ashraf Eassa owns shares of Intel, NVIDIA, and Advanced Micro Devices. The Motley Fool recommends Intel and NVIDIA. The Motley Fool owns shares of 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.