Please ensure Javascript is enabled for purposes of website accessibility

NVIDIA Continues Outpacing AMD in Graphics Cards, and It Isn't Done Yet

By Harsh Chauhan - Mar 14, 2021 at 7:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The GPU specialist is turning up the heat in the graphics card market with its impressive strategy.

It is no secret that NVIDIA (NVDA 5.38%) dominates the discrete graphics cards market, leaving rival Advanced Micro Devices (AMD 3.55%) far behind in a two-horse race despite the latter's best efforts to make a dent in this lucrative space.

The bad news for AMD is that it has fallen further behind in the battle for GPU supremacy, and NVIDIA could heap more pain on its rival.

AMD gets punched in the gut

Jon Peddie Research's GPU market report for the fourth quarter of 2020 suggests that NVIDIA isn't giving AMD any room to flex its muscles. NVIDIA ended the year with 82% of the discrete GPU market under its control, up from 73% in the year-ago period. The graphics specialist also extended its lead on a quarter-over-quarter basis, gaining 2 percentage points over Q3 2020.

two horses and two jockeys racing on a track

Image source: Getty Images.

This is a terrific comeback from NVIDIA. The company has clawed back the share it had lost to AMD a year ago when NVIDIA's share of the graphics card market fell below 70%. That's not surprising, as NVIDIA's Ampere-based RTX 30 series graphics cards are all the rage among gamers and cryptocurrency miners. AMD, on the other hand, seems to have bigger problems on the supply chain front as compared to NVIDIA. These two factors could help NVIDIA crush AMD further in the GPU market this year. Let's see why.

NVIDIA is going all out to capture graphics card demand

Graphics cards are in short supply because of overwhelming demand and a shortage of components. NVIDIA admitted on its Feb. 24 earnings conference call that "channel inventories will likely remain low throughout Q1" despite the company's efforts to increase supply. In fact, the company exited its fiscal fourth quarter with a lower channel inventory of the RTX 30 series cards.

AMD sees tight supply persisting through the first half of 2021, with relief expected to arrive only in the second half when capacity additions come into effect. All of this indicates that the situation isn't expected to ease anytime soon. J.P. Morgan estimates that it may take three to four quarters for GPU supply to catch up to demand, after which it may take another couple of quarters for channel inventories to reach normal levels.

NVIDIA, however, has been deploying a smart strategy to overcome this shortage. The company is ramping up the production of older-generation graphics cards to address the end-market demand. The accessible pricing of these cards and their inability to mine cryptocurrencies could help NVIDIA dish out more chips for gaming enthusiasts. At the same time, NVIDIA is reportedly limiting the hash rate on its GPUs so that they cannot be used for cryptocurrency mining.

Another way NVIDIA is looking to free up more supply for gamers and cater to cryptocurrency miners at the same time is through dedicated cryptocurrency mining processors (CMP). NVIDIA explained in a blog that these CMPs meant for professional miners "don't do graphics," as they are devoid of display outputs. The CMPs have lower peak voltage and frequency to boost mining efficiency.

These moves should help NVIDIA capture more of the video gaming market and extend its lead over AMD. NVIDIA investors would be celebrating such a possibility given the terrific pace of growth of its video gaming segment, which accounts for half of the company's total revenue.

The video gaming business pulled in $2.5 billion in revenue last quarter and helped NVIDIA deliver $5 billion in total revenue, a 61% jump over the prior-year period. The chipmaker expects to hit $5.3 billion in revenue this quarter, which would represent 72% growth over the prior-year period. It won't be surprising to see NVIDIA walk the talk, as its biggest business could become even bigger thanks to the strategies it is deploying to capture a larger share of the GPU market.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$188.11 (5.38%) $9.60
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$102.26 (3.55%) $3.51

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.