Advanced Micro Devices (NASDAQ:AMD) has been losing discrete GPU market share to rival NVIDIA (NASDAQ:NVDA) for the past few years. With NVIDIA continually beating AMD in the high end of the market, the former has been able to claim a roughly 65% share of discrete GPU sales.

AMD's recent announcement of a new high-end GPU offering, the Radeon 295X2, accomplishes something that AMD has been unable to do in quite some time. NVIDIA has no products that compete with the new card on price or performance, leaving AMD with a small, but very profitable corner of the high-end market. This is certainly a win for AMD -- one that it desperately needs -- but it will take a lot more than a single high-end product to wrestle significant market share away from NVIDIA.


Source: AMD

Going all out for the high end
The Radeon 295X2 is a monster of a GPU. Set to go on sale soon, the $1,500 card crams two of the company's 290X GPUs into a single product, drawing a staggering 500 watts of power, under load. The 295X2 comes equipped with a built-in liquid cooling system -- the only way that much heat could be effectively dissipated. Given the specs, it's clear that this GPU is aimed at the highest of the high-end PC gaming market.

The 295X2 is aimed at those looking to play PC games at a 4K resolution, a very small segment of the PC gaming market. According to Steam, only about 1.6% of Steam users use a resolution higher than 1920x1200, roughly a quarter of the number of pixels in a 4K display. This isn't surprising, given the price of 4K monitors is often in the thousands of dollars, and this percentage will remain low until those prices come down.

But however small the number of those playing at 4K resolutions is, the 295X2 is essentially the only game in town. Playing modern games at high settings at a 4K resolution requires a tremendous amount of graphics processing power, and while some other GPUs produce playable frame rates in some cases, the 295X2 is the only one capable of getting close to 60 fps. For those shelling out more than $1,000 on a 4K display already, the choice is clearly the 295X2.

A gap in NVIDIA's product portfolio
At a more common resolution, like 1080p, the 295X2 is complete overkill, and any high-end single-GPU card provides acceptable performance. But 4K gaming represents a gap in NVIDIA's line of GPUs, and that gives AMD a big advantage until NVIDIA releases a viable competitor.

NVIDIA has already announced a dual-GPU card of its own, the GTX Titan Z. But with a planned price of $3,000 and performance that may not even match the 295X2, it's really not a competitor. The Titan Z is aimed more at computing users, offering a budget version of NVIDIA's Tesla line of GPUs meant for scientific simulations and the like; it's not a very compelling choice for gamers unless the planned price comes way down.

At a lower price of $1,100 is NVIDIA's Titan Black, but this can't keep up with the 295X2 at 4K resolutions. NVIDIA offers nothing in between, other than a multiple-GPU setup, and this essentially hands the 4K gaming market to AMD for the time being.

Winning the battle, losing the war
While the 295X2 is an important victory for AMD, NVIDIA still offers the best price per performance at most other high-end price points. According to Tom's Hardware, which does a monthly review of gaming GPUs, NVIDIA's products are currently superior at every price point above $200, with a sole AMD GPU able to tie at the $500 price level. So while the 295X2 will be in a league of its own once it's released, that league is very small compared to the portion of the market that NVIDIA dominates.

The bottom line
While the 295X2 shows that AMD can compete at the high end, it doesn't change the overall picture very much. NVIDIA became the market leader because it offered the best performance per dollar at a large range of prices, and it continues to do that. The market for 4K gaming is still in its infancy, and while AMD currently has the upper hand, there's no guarantee that it will last.

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Timothy Green owns shares of Nvidia. The Motley Fool recommends Nvidia. 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.

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