In every market where Advanced Micro Devices (AMD +0.79%) competes with chip giant Intel (INTC +0.42%), the company is stealing share from its larger rival. What's more, the pace at which AMD is winning share in the notebook chip market is quickening, a testament to the quality of products the company is now churning out.
Data from Mercury Research for the second quarter shows the tide continuing to turn in the x86 processor market. While AMD's market share gains in the desktop PC and server chip markets were similar to recent quarters, the company is making substantial progress in the notebook chip market.
Image source: AMD.
Steady gains for desktops and servers
AMD's unit share of the desktop PC processor market was 19.2% in the second quarter. That's up 0.6 percentage points from the first quarter, and up 2.1 percentage points from the same period last year. In recent quarters, sequential market share gains ranged from 0 to 0.9 percentage points.
AMD's last significant desktop chip launch was the Ryzen 3000 series in July of 2019. The company rolled out some refreshed chips in June of this year, but they're built on the same architecture and manufacturing process as the original 3000 series chips, offering only minor performance improvements. The company also recently launched a line of OEM-only desktop chips with integrated graphics, but they too use the same technology as the 3000 series chips. AMD is expected to launch new 4000 series desktop chips, based on the new Zen 3 architecture, by the end of the year.
In the server chip market, AMD started from close to zero a few years ago. The company claimed a 5.8% unit market share in the second quarter, up 0.7 percentage points from the first quarter, and up 2.4 percentage points year over year. Mercury Research's data counts all server class processors; AMD's market share would be higher if only chips going into traditional servers were included.
Breaking out in notebooks
While a portion of desktop chips go to those building their own PCs, that's not the case in the notebook market. To win notebook market share, AMD must convince OEMs to build systems around its chips.
Until the second quarter, AMD's desktop market share was higher than its notebook market share. The situation has now flipped: AMD claimed a 19.9% unit share of the notebook chip market in the second quarter, up a whopping 2.9 percentage points from the first quarter, and up 5.8 percentage points year over year.
The launch of AMD's Ryzen 4000 Mobile chips earlier this year is likely the main driver of this acceleration in market share gains. The company said during its second-quarter earnings call that there were 54 Ryzen 4000 notebooks currently on the market, with more on the way in the second half of the year.
The biggest challenge AMD may face in the notebook market is brand perception. After many years of AMD-powered laptops being rightfully viewed as inferior to Intel-powered laptops, it may take a while for the typical notebook buyer to stop favoring Intel.
More market share gains ahead, but investors beware
Given the quality of AMD's recent products, more market share gains for the company are likely. However, the market is already pricing in some staggering growth. AMD is valued at about $100 billion, roughly 11 times the average analyst estimate for 2020 sales and 80 times the estimate for earnings.
AMD may be able to deliver enough growth in the coming years to justify today's valuation, but any stumble could send the stock plunging. The story behind AMD is compelling, but it's a risky stock, nonetheless.
