Can AMD Continue Eating NVIDIA's Lunch?

AMD extended its market share gains last quarter, but it might temporarily lose traction before bouncing back once again.

Harsh Chauhan
Harsh Chauhan
Jun 25, 2017 at 1:28PM
Technology and Telecom

The battle for the discrete graphics processing unit (GPU) market is getting more intense with each passing quarter, with both Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA) trying to win a bigger slice of the pie with their latest products.

AMD is stealing market share away from NVIDIA, according to the latest data from Jon Peddie Research, with the former's stake in discrete GPUs rising impressively year over year during the first quarter (from 23.2% to 27.5%). Over the same time frame, NVIDIA's market share dropped from 76.7% to 72.5%, according to this research. Let's take a closer look at what's working in AMD's favor and whether it can continue making inroads into NVIDIA's stronghold.

AMD Radeon GPU

Image source: AMD.

AMD gaining

AMD staged a big comeback in 2016 with its Polaris GPU lineup. In fact, the Polaris architecture-based GPUs helped AMD gain 10 percentage points of market share in the sub-$299 GPU segment, boosting the company's overall GPU market share by 8 percentage points in 2016.

Therefore, AMD's gains were primarily driven by mid and entry-level GPUs last year, and the trend has continued in 2017. AMD did lose 2 percentage points of market share to NVIDIA on a quarter-to-quarter basis, according to the Jon Peddie data. But investors shouldn't read too much into this decline given the seasonal weakness in GPU shipments during the first quarter. Additionally, NVIDIA decided to rain on AMD's parade by slashing its GPU prices during the first quarter.

This isn't surprising, as NVIDIA's high-end cards were already close to a year old, so the company decided to move more units by reducing prices before its next-gen products hit the shelves. But the battle for GPU supremacy will heat up during the second half of the year as new products from both GPU specialists hit the market.

Can AMD's new products continue to advance?

AMD investors expect the company's new Vega line of GPUs to help sustain the good work that Polaris began once they go online in the current quarter. In fact, the company has already scored a crucial win, as Apple's new top-of-the-line iMac Pro will be powered by the new Radeon Pro Vega GPU.

Apple is billing this device as the most powerful Mac ever built, setting its sights on the virtual reality (VR) market. iMac users will be able to dit 360-degree video with the help of AMD's new graphics card, which is the ideal requirement to create 3D VR content. Cupertino's push into VR could be a big deal for the company, as TechNavio forecasts that the VR content market will grow at an annual pace of 127% until 2020, with PCs being the preferred platform for content creation.

Gamers can expect AMD's new Vega GPUs to hit the shelves in June and July. However, AMD investors should brace for a lull in sales during the second quarter (April to June), as rival NVIDIA has already launched its new flagship GPU at aggressive prices.

NVIDIA's high-end GTX 1080 Ti and Titan Xp GPUs went on sale in March and April, respectively, so it might take some business away from AMD given its delayed launch. But AMD now has an advantage over NVIDIA, as it can strategically price its products to win more customers. What's more, AMD will have its Vega GPUs out in time before the seasonally strong third and fourth calendar quarters of the year, when shipments traditionally increase.

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