Don't Buy AMD's ARM Server Story

Advanced Micro Devices (NYSE: AMD  ) has shown staggering resilience in the face of many years of financial peril. Whenever a business begins to crumble from within, management looks to promote some "next big" idea. Sometimes the idea is good, but the execution is often poor, and other times the idea just wasn't meant to be. After AMD lost nearly all of its x86 server share, it hopped onto the ARM (NASDAQ: ARMH  ) server bandwagon.

There's nothing magical about ARM servers
Marketing headlines that ARM server players typically try to push are usually of one or more of the following flavors:

  • ARM is disrupting x86 servers
  • ARM servers will offer choice
  • ARM is lower power

Unfortunately, while these marketing points may be catchy, they're almost patently false. From a power consumption standpoint, the inherent difference between the ARM instruction set and the Intel (NASDAQ: INTC  )  x86 instruction set is negligible (and far outweighed by Intel's design expertise and manufacturing lead). What's really interesting is that AMD's own data (note that AMD is using ARM's latest-and-greatest Cortex A57 IP) seems to suggest that its upcoming ARM server chips actually isn't competitive on performance/watt against Intel's currently shipping Avoton micro-server part.

Illustrating the point
Check out the following information on Anandtech.com via AMD,


Source: Anandtech

The upcoming ARM-based Opteron A1100 scores 80 in SPECint_rate, an industry standard CPU benchmark that often informs the decisions of server buyers. Note that this performance is achieved in a 25W power envelope (according to AMD's TDP rating).

According to Intel, its own Atom C2750, with a 20W TDP, scores 106 on this same benchmark.


Source: Intel

For a micro-server where performance per watt is king, it is plain that Intel gets ~5.3 SPECint_rate/watt while AMD's ARM based solution gets 3.2 SPECint_rate/watt. This implies that Intel has a 65% performance/watt advantage over the competing AMD solution based on ARM's finest!

It gets worse

Note that the Atom C2750 has been shipping and available for purchase since late 2013, while AMD's part won't be available until late 2014 (it begins sampling in March). This means that Intel could sit back and not bother to release a next-generation part and still have a performance/watt advantage. Unfortunately for AMD, though, Intel plans to release not just one, but two new parts for this space, built on its next-generation "Broadwell" and "Airmont" processor cores, in late 2014.


Source: Intel

These will have higher performing cores and, likely, more of them. Also, it is likely that the rest of the non-core parts of the SoC will be significantly enhanced. In this case, things may get very ugly for AMD's competitive situation very quickly.

Foolish bottom line
AMD is wonderful at drumming up expectations for its next-generation server products, but the reality is that AMD's own numbers suggest that this upcoming ARM part won't be competitive. This doesn't even take into account the relative immaturity of the ARM software ecosystem for servers (a big disadvantage), nor does it take into account Intel's superior cost structure.

AMD has a very tough road ahead in servers -- ARM is not the panacea that AMD tries to pitch it as. The same fundamental problems that plagued AMD's x86 server efforts will, once again, plague AMD (and the other ARM server vendors) in servers. Be very wary of buying the hype. 

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Comments from our Foolish Readers

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  • Report this Comment On January 29, 2014, at 10:46 PM, chessplaya wrote:

    let me remind you of your conclusion on an article you wrote over at SA not too long ago....

    "Conclusion

    AMD has truly "cleaned house" and brought in management that seem to really understand the situation that the company is in. There are no guarantees for anybody in this space, but for the first time in a long time, I find myself legitimately excited to see if AMD can succeed in the cloud server market. While its competition is still fierce and the landscape unknown, I do know that I walked away from my conversation with Mr. Feldman very impressed. And, at the very least, that opens the door to situation where "this time it'll be different" really could apply."

    whatever share of the server market ARM ends up taking by 2019, AMD will be the leader there... it's a no brainer $3.48 is a gift.

  • Report this Comment On January 29, 2014, at 11:35 PM, keeperoftheq wrote:

    The reason ARM will be successful is not performance per watt.

    A minor performance-per-watt advantage (and by 2015 all signs point to it being minor at best) is not great enough to get people to switch architectures, he said.

    Instead, the flexibility of the ARM architecture will be vital – specifically, the freedom to license a streamlined ARM core design and bolt on whatever custom hardware is needed to perform or accelerate a particular task. This approach contrasts Intel's beefy but general-purpose packages.

    "It's the ability to customize around ARM's intellectual property, which you cannot do with Intel intellectual property, "If you're Google looking at some kind of acceleration, or Sandia Labs looking at very specific algorithms you want to tune for, or you like the SeaMicro fabric and want disaggregated resource models – that's why you pick ARM."

    Though Intel has an early-stage custom x86 chip business that already works with eBay and Facebook, The pace at which a company can either buy and modify ARM chips, or contract to a third party like AMD SeaMicro to do so, will beat Intel every time.

    Pay attention, Applied Micro's "X-Gene" team, and AMD's "Seattle" crew, or else you risk a dim reception to your promises of future chippery.

    Intel will be losing market share. ARM servers are the future.

  • Report this Comment On January 29, 2014, at 11:50 PM, keeperoftheq wrote:

    AMD alluded to substantial cost savings over competing Intel solutions with support for similar memory capacities. AMD tells me we should expect a total "solution" price somewhere around 1/10th that of a competing high-end Xeon box, but it isn't offering specifics beyond that just yet. Given the Opteron X2150 performance/TDP comparison, I'm guessing we're looking at a similar ~$100 price point for the SoC. There's also no word on whether or not the SoC will leverage any of AMD's graphics IP.

    The Opteron A1100 is aimed squarely at those applications that either need a lot of low power compute or tons of memory/storage. AMD sees huge demand in the memcached space, cold storage servers and Apache web front ends. The offer is pretty simple: take cost savings on the CPU front and pour it into more DRAM.

  • Report this Comment On January 30, 2014, at 12:33 AM, amota001 wrote:

    Ashraf Eassa its amazing how bias you are

  • Report this Comment On January 30, 2014, at 5:58 AM, markstomarks wrote:

    Let me get this straight. I read "subjective" news article like this one, am experienced in the markets since 1980, have been in AMD stock in some form since its IPO, know and understand the company well and I am to take the word over a young, nice yet likely highly inexperienced writer over AMD and my knowledge as an investor and trader knowing shorts are desperate and the smart ones covered so hard in December, the short value of the stock decline by an entire 20% and continues to decline which leaves only the regular majority of inexperienced shorts?

    I note like on BBRY, BAC, First Solar, Groupon and many others at their lows when I was buying and everyone was in a panic, there were news stories out on each one like this article, I made prediction prices, said all was okay and now, those shorts are in debt and those who sold are kicking themselves. First solar was 13 and 14 a share. BAC was under $4, Groupon was near a buck and in December, BBRY hit a low and I said it was going to $10 soon and was laughed at as it went to $11 lol

    AMD is not going to do a 300% gain real fast however; its earnings are improving over a year ago, it is becoming a lean, mean, diversified machine and is going to $7 and then at least $10 this year and then at least $20 next year imo and I am to sell? Never.

  • Report this Comment On January 30, 2014, at 8:27 AM, bluesky64 wrote:

    Ashraf,

    You are dogging AMD each day it will bite you one day. ( AMD 2014 great American turnaround story )

    Every day AMD is and will continue to push forward with great results.

    Here are just 2 new one today

    Socketed Kabini Processors Rumored For March

    http://www.anandtech.com/show/7725/socketed-kabini-processor...

    AMD officially launches Mantle, new driver and patches available soon

    http://www.techspot.com/news/55500-amd-officially-launches-m...

    Try to take a step back and look at the big picture AMD is forging ahead.

  • Report this Comment On January 30, 2014, at 8:39 AM, bluesky64 wrote:

    More today just to confirm my point.

    AMD Delivers Peak Performance for Key Features and Creative Workflows in Latest Photoshop(R) CC Release

    Development Through Open Standards Taps High Performance AMD A-Series APU, Radeon(TM) and FirePro(TM) Graphics Processing to Get the Most of Smart Sharpen, 3D Printing, and Other New Features

    http://finance.yahoo.com/news/amd-delivers-peak-performance-...

  • Report this Comment On January 30, 2014, at 8:55 AM, bluesky64 wrote:

    News another update

    Battlefield 4 AMD Mantle update released

    While there were some reports flying around about further delays of the Battlefield 4 Mantle patch it has been delivered on time today by DICE. The necessary AMD Catalyst 14.1 beta drivers - to get Mantle optimisations to work - are yet to be released publically but are expected to be available later today.

  • Report this Comment On January 30, 2014, at 9:51 AM, KenLuskin wrote:

    Created by Ken Luskin January 27, 2014

    KenLuskin@gmail.com

    SIGNS of a PARADIGM SHIFT in COMPUTING that are leading to a TIPPING POINT for AMD

    Malcom Gladwell, in his book, The Tipping Point: How Little Things Can Make a Big Difference, defines it as “the moment of critical mass, the threshold, the boiling point,” where “ideas and products and messages and behaviors spread like viruses do.”

    Think of a Paradigm Shift as a change from one way of thinking to another. It's a revolution, a transformation, a sort of metamorphosis. It just does not happen, but rather it is driven by agents of change.

    CPU domination is ending

    Computing has been dominated by a type of processor called the CPU, or central processing unit. The processing of information is based upon one logical computation after another in a sequence. It is called threaded, much as a needle leads a thread to a logical endpoint, and then a new thread is started.

    But, the real world presents so much information in the form of light rays hitting our eyes, and sounds to our ears, that using a CPU to process this info is extremely inefficient. This type of processing requires numerous computations to be all done simultaneously, rather than sequentially.

    For the purposes of processing real world information, parallel processing was invented. Many CPUs are strung together, and this forms a supercomputer, that can do parallel processing. That means it can simultaneously process a huge amount of information.

    The GPU is BORN

    Finally in the late 1990s, a new processor was invented for massively parallel processing. These processors are called GPUs, for graphical processing unit. The first uses of GPUs were and still are graphical information. The main current use of GPUs outside of accelerating the speed of a supercomputer, is for rendering digital images.

    Instead of a CPU drawing one dot, or pixel at a time on a screen, a GPU creates all the pixels at the same time. Without a GPU, the rendering of digital images is extremely inefficient.

    GPUs have been mainly used to create digital images for video games. A program is created that tells the GPU what to render.

    AAA video gaming is a significantly larger industry than Hollywood. Most of the highest grossing video games cost more to create than the average Hollywood movie. The vast amounts of money spent on the video game industry are the driving force in funding the development of GPUs. It is no coincidence that the 2 leading GPU design companies are the main suppliers of discrete GPU graphic cards for PCs.

    THE FIRST SIGN: GAME CONSOLES

    AMD used their 64 bit X86 CPU architecture to create an Accelerated Processing Unit, or APU. The APU is AMD’s way of uniting a CPU with their own proprietary GPU architecture, onto one die or chip. Intel, Qualcomm, Nvidia, etc. also have a GPU integrated onto a single chip, which is called an SoC, or system on a chip.

    AMD’s APUs are 64 bit, combined with significantly greater GPU power than Intel has, is the reason that Sony and Microsoft chose them to power their new game consoles. Because the only other major game console maker, Nintendo, is also using AMD Graphics, AMD has total domination of the AAA video game GPU architecture.

    Almost all new AAA video games are optimized for the game consoles, and then ported over for use on a PC. AMD worked closely with Sony and MSFT to create application programing interfaces, or APIs, that would be much more efficient than the API that is currently used on PCs. The APIs on the new Xbox1 and PS4 allows video game developers to send commands directly to the GPU portion of the AMD APU, rather than to be first sent to the CPU. These APIs reduces the need for a super fast CPU, while increasing the overall speed that can programs can be rendered. AMD’s GPU architecture is different from that of Nvidia and Intel. Because all new AAA video games will be optimized for AMD architecture, they will run better on PCs using AMD GPUs.

    THE SECOND SIGN : MANTLE API

    The speed of the processors is measured in GigaHertz, or GHz. While the CPU portion of the AMD APUs are running at 2GHz or more, the GPU portion is running at 1 GHz or less. The equivalent of the console APIs was created by AMD for PCs, and is called MANTLE. If a game is NOT designed using the Mantle API, then the commands must first be sent to the CPU, then relayed to the GPU. Therefore, a slightly faster CPU will increase the speed of the game. Because of this situation, many hardcore gamers chose to buy a faster CPU from Intel.

    Now, that ALL new games will be created for the new consoles, most developers will choose to use the Mantle API when they port over for play on a PC, to replicate the experience on the consoles.

    AMD has reported that 20 new games, which is the bulk of the new AAA games this year, will be supporting Mantle.

    One of the most successful AAA game franchises is called Battlefield, and their newest game Battlefield 4, is reported to run 45% faster when using Mantle.

    The MANTLE API is the main reason that AMD has indicated they have more than 50% of the design wins for discrete GPUs in Laptops that will be released this year. Laptops OEMs know that they will be at a competitive disadvantage if they use Nvidia discrete GPUs, after it becomes widely known that new AAA games will run significantly better on AMD GPUs.

    THIRD SIGN : MICROSOFT and ORACLE SUPPORTING HSA

    AMD created the HSA foundation to share some of their APU architecture with the rest of the chip industry so as to make it an open standard. AMD’s APU architecture was so compelling that they were able to enlist ARM Holdings, SAMSUNG, QUALCOMM, and TEXAS INSTRUMENTS as founding members of the HSA foundation. The reason that AMD and these companies are supporting a new open standard for chip architecture is so the large operating systems and software developers will also support it. But, AMD is the largest beneficiary of the HSA architecture, which is in the chips powering the MSFT and Sony consoles, but also in their newest PC chip called KAVERI.

    HSA architecture in Kaveri allows Operating systems and programs direct access to the GPU portion, and allows the GPU and CPU to share a common memory. This allows the power of the GPU to be more easily accessed by common programs, and increases the efficiency of the chip, because of a shared memory.

    In general, a GPU can produce 5 times as many Gigaflops as the CPU. So, while not all tasks are suited for the GPU, there are many that are now being handled by the CPU which could be much better processed by the GPU.

    Hardware, such as a microchip, greatly benefits from the amount of software supporting it, which creates an ECOSYSTEM

    The success of Intel is mostly based upon the fact that Microsoft chose to optimize MS DOS/Windows operating system for Intel’s X86 architecture.

    The success of ARM is because Apple and Google created mobile operating systems that support its CPU architecture.

    AMD already has all 3 game console makers using its GPU architecture. Which means all the new AAA games are being optimized for AMD architecture. The creation of the MANTLE API will translate AMD’s console GPU domination over to PC gaming.

    Support for AMD’s HSA foundation architecture by Microsoft and Oracle, is a good sign that other software will also be optimized to support it.

    FOURTH SIGN: THE NEW ERA of COMPUTING REQUIRES MORE GPU PROCESSING POWER

    The new era of computing is based upon computers processing real world inputs, rather than relying upon programs or input from a keyboard. This video December 2013 Embedded Vision Alliance Member Meeting Presentation: "The GPU’s Role

    in Vision Systems," Dr. Jon Peddie, Jon Peddie Research

    is 50 minutes, but it is well worth watching, if you really want to understand what I am trying to convey.

    The new era of computing requires the massive parallel processing power of a supercomputer, but at an affordable price for the average person.

    Because the GPU can process vast amounts of information at 5 times the power of the CPU, it will be increasingly relied upon, rather than CPU.

    Efficient voice processing is mainly done in the cloud because of the massive processing power required. But, since all computers, even smart phones have integrated graphics, other less complicated tasks can be done on the device.

    The AMD powered Xbox1 has powerful sound and vision recognition. The Xbox1 has infrared vision, which means it can see in the dark! The Xbox1 can recognize and differentiate between people based upon their voice, and where they are sitting or standing in a room.

    CONCLUSION

    While Intel is charging $300 for their core i7 chip, AMD is charging MSFT $100 for the APU that powers the Xbox1.

    AMD’s APUs have powerful integrated graphics at an affordable price, which is why they are positioned to dominate in providing processors for the new era in computing.

    The new era in computing is a classic paradigm shift. Cloud computing and increased wireless communication bandwidth are already recognized as the driving forces in this paradigm shift.

    Increased use of the GPU is not yet recognized by most investors as a paradigm shift in computing.

    A huge opportunity exists to invest in AMD, before the trend becomes more apparent, resulting in surging sales and earnings.

  • Report this Comment On January 30, 2014, at 10:03 AM, KenLuskin wrote:

    CUSTOMIZATION is what ALL the major CLOUD players want:

    >>>"Instead, the flexibility of the ARM architecture will be vital – specifically, the freedom to license a streamlined ARM core design and bolt on whatever custom hardware is needed to perform or accelerate a particular task. This approach contrasts Intel's beefy but general-purpose packages.

    "It's the ability to customize around ARM's intellectual property, which you cannot do with Intel intellectual property, "If you're Google looking at some kind of acceleration, or Sandia Labs looking at very specific algorithms you want to tune for, or you like the SeaMicro fabric and want disaggregated resource models – that's why you pick ARM."<<<

    MEMORY:

    >>>"AMD alluded to substantial cost savings over competing Intel solutions with support for similar memory capacities."<<<<

    >>>"The offer is pretty simple: take cost savings on the CPU front and pour it into more DRAM."<<<

    DENSE SERVER FABRIC:

    SeaMicro has a proven and highly desirable "fabric" that Intel does NOT have.

    The reason that ARM will take at least 25% of the server market is because of CLOUD use, with DENSE servers.

  • Report this Comment On January 30, 2014, at 10:07 AM, rav55 wrote:

    "Don't Buy AMD's ARM Server Story"

    Ashraf:

    Are you accussing Rory Read of lying and deceiving the investors? That's a pretty harsh accusatoin that you are leveling at Read. Sounds like libel.

  • Report this Comment On January 30, 2014, at 10:12 AM, mtechac wrote:

    Ashraf, your hate for AMD and desperate support for a failing Intel is a dis-service to any investor wanting to research and earn stock profits.

    You misleadingly mix technology information with your bias to put down AMD and to try to keep hopes for Intel.

    Last year, anybody who follow your advice and sold AMD lost 70% profits, while Intel news has been very disappointing and your spectacular news that Intel will reign last year and this year did not happen and may not happen for years, or never.

    If you hate so much AMD, then you are not qualified to write articles about AMD because you are blind with hate. AMD already reorganized, is releasing excellent technology, and can profit from a low profit product margin ARM/x86 business, which puts it in a much better position than Intel that makes its profit from hiking prices and its current dependency on high profit product margin is a dead sentence to Intel in these business times.

    If you love so much Intel, then write articles praising it, even if Intel will not be in a position to continue its current profits for a couple of years and may be a loss in profit for many investors.

  • Report this Comment On January 30, 2014, at 10:23 AM, Uconfan wrote:

    Ashraf

    There you go again. This must be the fifth anti AMD article in 5 days. The comments are more informative than your statements.

    One question

    Are you paid by Intel?

  • Report this Comment On January 30, 2014, at 11:02 AM, KenLuskin wrote:

    I do NOT see the downside in AMD barring a world wide depression.

    AMD's PC business is now too small for Intel to damage.

    The real damage in the PC area has not come from Intel, but from Tablets.

    AMD has shifted their mix towards commercialal desktop, which is NOT in competition with Tablets.

    Intel will do about $8 billion in PC sales in Q1, while AMD is guiding to slightly over $500 million.

    Since AMD's prices are at least 10% to 20% lower than Intel, there is NO way Intel can increase sales and income by lowering prices.

    If Intel lowers prices 10% on the $5 billion of low to medium end chips, that reduces sales and profits by $500 million, and puts downward pressure on their high end.

    OEMs will do continue to do business with AMD, because they want to use them to keep Intel honest.

    With PC sales stabilizing, especially in the desktops, combined with AMD's cost reductions, AMD will NOT lose any appreciable $$ in the PC area.

    Meanwhile, GRAPHICS sales are EXPLODING!

    1) Apple head of Graphics joined AMD in April 2013

    2) Nvidia head of sales joined AMD in Jan 2013

    3) Nvidia head of Professional graphics joined AMD in Oct. 2013

    ANALysts and most investors are making the CLASSIC mistake of focusing on the OLD business, while the NEW business is exploding.

    Same thing happened at Apple in 2003 until mid 2004.

    Very few people understood Apple's dominance of music.... When they finally woke up, Apple stock EXPLODED!

    Same thing will happen to AMD over the next few years.

    Server opportunity is the icing on the GRAPHICS cake!

  • Report this Comment On January 30, 2014, at 12:24 PM, SSchlesinger wrote:

    Ashraf is a fan of Intel, but not a fanboy. He is often openly critical of Intel. It is interesting to read Ken's take on parallel processing. It's great that people are passionate about their positions.

    There are some nice applications for parallel processing such as scientific research where hard core number crunching is necessary or bitmining. But, let's be honest, how much of the server market is going to switch to parallel processing? 30%, 40%?

    I think AMD's future is one server sale at a time followed by a press release for each sale. All respect I had for AMD as a company was lost by one Mr. Andrew Cuomo. Intel was coming out with the Larrabee which was a so/so video card. AMD had better stuff, but was scared of what Intel in the video card market could do. So, AMD had Andrew Cuomo bring an antitrust lawsuit against Intel. He was the New York Attorney General at the time. In 2010 Intel kills off Larrabee, or so they say. In 2012 Intel unveils the 50 core Intel Xeon Phi and takes installations away from Nividia's Tesla's coprocessor. It's a nice 22nm part, and a couple years old.

    14nm fabs will be open in the next 60 days at Intel. The news only gets worse. Intel is so efficient at making 14nm that they are getting better yields than they could ever dream of. They postponed the third 14nm fab, fab 42.

    Ken, you write well, you make a very compelling story, but if AMD gets anywhere near Intel's core server business they will be chased away. Enjoy your game consoles. When real work needs to get done, the industry turns to Intel.

  • Report this Comment On January 30, 2014, at 12:38 PM, wownwow wrote:

    Can't understand why people are still spending time with this writer.

    It's interesting to know what he has in mind.

  • Report this Comment On January 30, 2014, at 12:46 PM, bluesky64 wrote:

    Ashraf,

    Please check out this complete report

    Latest sales forcast for AMD

    http://www.scribd.com/doc/203457003/AMD-UNDERESTIMATED-GUIDA...

  • Report this Comment On January 30, 2014, at 1:51 PM, wownwow wrote:

    bluesky64,

    Thanks for the link. Basing on the big picture, what has been happening and Mr. Rory Read's leadership, creditability and character, it's what I have been anticipating for the next few years, but it's dangerous to estimate for quarters.

  • Report this Comment On January 30, 2014, at 9:04 PM, wownwow wrote:

    SSchlesinger,

    "But, let's be honest, how much of the server market is going to switch to parallel processing? 30%, 40%?"

    True, but Intel needs to make more than $4.2B when AMD makes $100M.

    The challenge is AMD itself to net its first $100M. It will surely be there but tales time.

  • Report this Comment On January 30, 2014, at 9:42 PM, rav55 wrote:

    Every ARM Server that AMD sells is one less x86 server that Intel sells.

    ANY DOWNTICK in Intel server percentage will be seen as weakness and Intel stock will crash.

    Intel has nowhere to go but down. That's what happens when you try to monopolise a market, eventually competition finds a way to bring you down.

  • Report this Comment On January 30, 2014, at 10:03 PM, Pannuboy wrote:

    Is it me or this guy has nothing better to write then taking shots at AMD?

  • Report this Comment On January 31, 2014, at 9:52 AM, rustianowski wrote:

    He's not even trying anymore. These aren't articles they are propaganda he assembled in his basement on a very affordable AMD based PC. Maybe when he has some relevancy, insight, or actual information I might get past the first 4 sentences in his articles.

    Until then, I just enjoy the awful information the same way people enjoy grocery store tabloids.

  • Report this Comment On February 09, 2014, at 8:06 PM, kjurden wrote:

    These articles written by assraf are purley written to create FUD. I hope someone with the Justice department or the SEC finds that he is being paid by INTC, NVDA, or some third party that has an interest in driving AMD's share price down and eventually shut him down...

    In the mean time investors need to know that he has relatively "NO Experience" trading stock. In fact he only recently graduated from UVM...

  • Report this Comment On February 11, 2014, at 2:30 PM, x000ald000x wrote:

    I love to read bearish articles. If the bear story drives down the price short term, we can all buy more at a lower basis. It's a gift.

    If we bulls are right about AMD, the shorts will all have to cover, eventually, and AMD will go from way-undervalued to way-overvalued. There is no telling how high it can fly in a short squeeze.

    Short selling and mostly-past financial problems have resulted in AMD being valued at one half the value of Pandora.

    Anyone can make a bear case on any stock, but in the case of AMD, most of the negative fruit has already been picked in the nosedive from 40 to 4. The only way the shorts make money now is if AMD goes belly up.

    It will not take much to send the shorts running for cover. "Patience, glasshoppah."

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