Advanced Micro Devices (NASDAQ:AMD) used to be a chip superstar. The story was compelling: It was a no-name second source to Intel (NASDAQ:INTC) that had risen to become the last man standing in the fight for the PC and x86-server chip markets. From 2003 to 2006, AMD had a pretty clear technology lead over Intel as its more efficient micro-architectures left Intel's GHz-happy strategy in the dust. AMD won big time, and its shareholders were amply rewarded. However, the story went south beginning in 2006 as Intel caught up and eventually left AMD in the dust.

The tablet situation
While AMD had been in a pretty rough competitive spot in both the PC and server markets over the last several years, the form-factor shift from PCs to tablets just made the situation worse. AMD's PC presence has been mainly in the low end, where it has majority share, even against Intel. That is the most susceptible to cannibalization by low-end tablets. As PCs declined, AMD not only saw its addressable market shrink, but it saw a desperate Intel start to focus on share gains at the low end to save its revenue stream.

As the reality sets in that the tablet form factor will be the most ubiquitous instantiation of the PC, both Intel and AMD will see their client businesses meaningfully shaped by their ability to produce class-leading products for these form factors. With the launch of Intel's Bay Trail product lineup for tablets, there's little question that Intel will be viable here, especially as the company has committed to shipping more than 40 million tablet units next year. But there still remains plenty of doubt over AMD's ability to compete here.

The roadmap gets better, but it still doesn't look competitive
When AMD was hyping its Temash system-on-chip last year, AMD tried to make it look as though it would be able to go head-to-head with low-power Intel and ARM (NASDAQ:ARMH)-based tablets. Tablets with this Temash part are exceptionally rare, precisely because it is unsuitable for this market. The higher-performance, quad-core parts are too power-hungry for iPad-like tablets. The lower-performance, dual-core parts don't have the performance of a modern Intel/Qualcomm/NVIDIA chip. It's the worst of both worlds.

Next year, AMD promises to do better with its 28-nanometer Beema and Mullins products targeted at Windows 8.1 devices. But there's nothing to suggest that they'll be competitive with Intel's current-generation Bay Trail products, let alone next year's Cherry Trail 14-nanometer with completely redesigned graphics. Let's also not forget that Intel is willing to price its tablet chips aggressively and provide significant NRE help to give tablet vendors more incentive to use its chips. Can AMD really go up against that, particularly with what is likely to be a lower-performing and/or higher-power product?

Foolish bottom line
Next year will be rough for AMD in the low end of the PC market, as Intel pushes aggressively into that space. On top of that, it's tough to see AMD offering any meaningful competition in the Windows 8.1 tablet space from a product perspective, let alone from the OEM perspective.

While AMD's future could be bright and prosperous outside the PC and tablet markets, and while the company could pull an ace from from its sleeve, investing in hope is much riskier than investing in facts. The facts today point to AMD stretching itself too thin and attempting to take on too many projects, all while it tries to cut operating expenses and manage costs in a deeply cutthroat environment. This is not a recipe for success -- quite the opposite, in fact.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. 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.