One of the great perks of writing for The Motley Fool is the email. Like all of our analysts, I receive plenty of missives, especially when I write something as controversial as this take on the November chip-sales report from the Semiconductor Industry Association. Here's the paragraph that set readers off:

"That's why I think a better strategy for chip investors is to research reasonably-valued firms that design or manufacture products aimed at cameras, phones, music players, TVs, digital displays, and gaming consoles. You know the stocks I'm talking about: SanDisk (NASDAQ:SNDK), NVIDIA (NASDAQ:NVDA), and pure-play manufacturers such as Chartered Semiconductor (NASDAQ:CHRT)."

For some, my mention of NVIDIA was a slight to Advanced Micro Devices (NYSE:AMD), whose purchase of ATI, the thinking goes, should aid the upstart chipmaker's core business in the event of a prolonged price war with Intel (NASDAQ:INTC).

My response? Of course it should. But I highly doubt it will be anywhere near enough, especially when NVIDIA has turned the tables on ATI to become the ka-ching king of the graphics-processor market. Let's have a look at the numbers, provided courtesy of Capital IQ:

Free cash flow

TTM ended May 31, 2006

TTM ended May 31, 2005

TTM ended May 31, 2004

ATI

($69.3) mil

$117.4 mil

$179.6 mil

NVIDIA*

$319.5 mil

$98.1 mil

($49.9) mil
* NVIDIA ends its fiscal Q1 on April 30. Data is for the closest comparable quarter.

Two companies. One headed in the right direction, the other headed backwards, and both facing an antitrust investigation that could be focused on price-fixing.

NVIDIA, with a gross margin of 41.6% as of October, seems reasonably positioned to absorb the cost of a government assault on its margins. I'm not so sure the same can be said about ATI, which retained 27.9% on the top line in its last reported quarter in May. And don't forget that ATI bled cash in the quarters leading up to its acquisition by AMD.

So, sorry readers, as much as I like CEO Hector Ruiz and his team, I can't see how AMD, mired in a price war and a legal tussle with Intel, is anything other than an expensive speculation. Invest accordingly.

Dip this chip take in some Foolish salsa:

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Fool contributor Tim Beyers, ranked 1,235 out of more than 19,200 in CAPS, didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. NVIDIA is a Stock Advisor selection. The Motley Fool's disclosure policy is a spicy treat for investors.