Advanced Micro Devices (AMD 5.25%) didn't have the best start to 2021 after it was reported that Intel (INTC 1.79%) has started turning the tide in the CPU (central processing unit) market with a small share gain in the fourth quarter of 2020. Chipzilla's turnaround led to concerns about AMD's ability to sustain its market share growth in 2021, especially after it was learned that the new Intel CEO could tweak the chip giant's strategy and expand the use of external foundries.

But the latest market share data from a credible source indicates that AMD continues to take share away from its bigger rival.

Let's take a look.

Person examining a processor.

Image source: Getty Images.

AMD is eating into Intel's market share in 2021

AMD's CPU market share increased by 0.46 percentage points in March, and the company finished the month with 28.97% of the market under its control, according to the latest Steam Hardware survey. Intel controlled the rest of the market with a share of just over 71%.

It is interesting to note that AMD's market share has increased in the first three months of 2021. Intel had clawed back some share from its smaller rival in December 2020 and ended the year with 75% of the CPU market under its control. AMD has hit back and reclaimed lost ground with three consecutive monthly share gains.

Of course, investors should take the survey results with a pinch of salt as it is limited only to Steam users. But with Steam boasting 120 million monthly active users in 2020, the survey does provide some credible insights about the broader CPU market. So, it can be said that Intel's market share gain looks like a flash in the pan so far, as AMD has regained its mojo once again.

More gains are in the cards

Supply constraints had handicapped AMD in the fourth quarter of 2020, allowing Intel to grab some market share. But Chipzilla's gains were reportedly in the lower end of the market, and the company also reduced the prices of its processors to boost shipments. The strategy weighed on Intel's margins with its non-GAAP gross margin dropping 1.7 percentage points in the fourth quarter.

The company has stuck to this strategy, as it anticipates a four-percentage-point decline in gross margin in the first quarter as shipments of small core processors are expected to increase. AMD, on the other hand, is witnessing strong growth in the higher end of the processor market, shipping 1 million units of the Ryzen 5000 processors in just the final eight weeks of 2020 as per Mercury Research.

AMD is now looking to turn up the heat in the higher end of the PC processor market. Supply chain sources indicate that AMD could increase production of Ryzen 5000 parts by 20% in the second quarter of 2021 as compared to the first quarter. This could help AMD corner more market share, as its high-end processors are reportedly better than Intel's competing offerings as per third-party benchmarks.

That's not surprising, as AMD took the gaming CPU crown from Intel after the launch of the Ryzen 5000 series processors last year because of its technological advantage. More importantly, AMD is unlikely to lose its advantage over Intel anytime soon.

A combination of better availability and a superior product line will be tailwinds in AMD's fight for more market share against Intel. These tailwinds can help AMD claw away more market share from Chipzilla as the year progresses. So, don't be surprised to see AMD achieve the ambitious guidance that it has set for itself this year and become a top tech stock once again after a tepid performance on the market over the past few months.