The last several years has been something of a renaissance for graphics processing units (GPUs). Once merely the domain of hardcore gamers, the humble processor has found a home in the growing trend of artificial intelligence (AI). The same number-crunching acumen used to render graphics was found to be equally adept at training AI systems.
Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA) are the two main players in the graphics processing arena, with NVIDIA controlling more than 70% of the discrete desktop GPU market and AMD picking up the remainder. The AI euphoria that has gripped the tech sector has enriched shareholders of both companies. AMD stock is up 113% in the past 12 months, while NVIDIA has skyrocketed 182%!
While both companies stand to benefit from the continuing trend in AI, only one has laid the groundwork to support future gains.
The case for NVIDIA
NVIDIA has a leading position in the gaming market and has parlayed that into a significant foothold across the processor landscape. Gaming still accounts for 53% of the company's top line, but it now has massive opportunities in other areas.
NVIDIA saw the writing on the wall five years ago and began repurposing its GPUs for use in AI applications. Not content to rest on its laurels, the company also continued to pour money into research and development searching for additional opportunities, and finding them in such areas as self-driving cars, cloud computing, and cryptocurrency.
NVIDIA already has its GPUs in a dominant share of data centers running AI applications, and has also released the NVIDIA DGX-1 AI Supercomputer, which can be used to fast-track AI applications with integrated AI software built in.
NVIDIA DRIVE PX is a scalable onboard computer for self-driving cars. The company boasts dozens of partnerships with automakers, tier 1 suppliers, and research institutions working on autonomous driving systems. The DRIVE PX processes information gathered by the various lasers, radar, and machine vision sensors and turns it into information the self-driving system can use.
These investments have paid off handsomely. In its most recent quarter, NVIDIA grew revenue by a whopping 56%, driven by AI-related datacenter gains of 175% over the prior year quarter, which has grown to 19% of the company's total sales.
The case for AMD
AMD is the much smaller of the two players, but recent developments have given investors hope that the recent run-up in the stock price won't be fleeting. AMD has created a lot of buzz with its latest line of Vega GPUs targeting both the low- and high-end of the market. It claims that its latest offerings compare favorably with NVIDIA's products in the premium market, but NVIDIA is set to debut its Tesla Volta V100 later this year, so that may be short lived.
AMD can also boast some recent wins, and is making inroads with major players. Chinese search giant Baidu, Inc. recently announced a collaboration with AMD "on optimizing software for AMD Radeon Instinct GPUs in Baidu datacenters."
Shortly thereafter, Amazon.com, Inc. revealed that it would use AMD's FirePro S7150x2 Server GPUs and equipped with AMD Multiuser GPU technology to run a new graphics design instance on the cloud. These may be small wins for the company, but they give it a foot in the door that could blossom into greater opportunities in the future.
In its most recent quarter, AMD grew revenue 19% over the prior year quarter, driven by demand in its Computing and Graphics segments. Unfortunately, the company was unable to translate that into profitability, though its loss of $16 million was a vast improvement over the $73 million loss in the prior year quarter.
While AMD has been making progress against its much more established competitor, it still has a ways to go before it can match the breadth and depth of NVIDIA's reach in the space. NVIDIA is the established leader, and has shown that it has what it takes.