Sony's (SONY 1.29%) PlayStation 5 console is winning the sales battle against Microsoft's (MSFT 0.71%) Xbox Series X. But that isn't surprising. Sony's huge installed user base and an impressive catalog of exclusive gaming titles were supposed to tip the scales in the PS5's favor despite Microsoft's attempts to seize the initiative this time with a more powerful console, at least on paper.

Advanced Micro Devices (AMD 1.66%) is making merry while all of this is happening. The chipmaker's semi-custom processors power both consoles, making it one of the best ways to take advantage of the booming sales of these devices. AMD's enterprise, embedded, and semi-custom (EESC) business has taken off big time since the new consoles went into production last year. It now seems that AMD is about to add extra firepower to the EESC business with its latest move, one which may also help Microsoft in its fight against Sony in the latest console war.

Two people playing a video game.

Image source: Getty Images.

The Xbox is about to become more desirable

On paper, the Xbox Series X is more powerful than the PS5. Microsoft's console packs in 12 teraflops of graphics card processing power as compared to the PlayStation 5's 10.28 teraflops. Additionally, the Xbox Series X boasts more compute units, higher bandwidth, and more storage. But the PS5 reportedly trumps the Xbox in real-world performance as per tests carried out by third-party outlets.

Video game technology and hardware review channel Digital Foundry (via The Verge) reports that the PS5 may be punching above its weight despite its hardware limitations. On the other hand, Digital Foundry opines that the new Xbox's graphics processing unit (GPU) is probably being "held back" by some limitations.

AMD's new technology, however, is expected to give the Xbox's performance a shot in the arm. Microsoft has confirmed that the FidelityFX Super Resolution (FSR) technology will find its way into the latest Xbox Series X and Series S consoles. In simple words, this tech will allow the Xbox to run games at higher framerates and resolutions.

According to AMD's internal test results, switching on FSR in the action role-playing game Godfall boosted the frames per second (FPS) to 78. The game was running at 49 FPS without the technology, indicating an impressive 59% increase in performance thanks to AMD's new tech. Of course, these are internal tests, and their results should be taken with a grain of salt, but it does indicate that it could fix a major chink in Xbox's armor compared to the PS5.

The FSR development kit has already been made available to developers making games for the Xbox platform. Additionally, unlike rival NVIDIA's competing DLSS (deep learning super sampling) image upscaling technology, AMD's FSR doesn't rely on machine learning and is open-source in nature. So, AMD's tech could witness strong adoption as it will allow developers to deploy the same to a wider range of gaming hardware, which also includes NVIDIA's GPUs.

All of this indicates that the latest Xbox consoles could become more competitive thanks to AMD, and that may help lift total sales. Let's see why.

The console war is heating up

Sony reportedly sold 2.83 million PS5 consoles in the first quarter of 2021, according to analytics firm Ampere Analysis. That was more than double the 1.31 million units of the Xbox Series X and the Series S sold during the quarter. According to another estimate, the PS5 has generated around $3.8 billion in sales so far since launching at the end of last year, with shipments of 8.6 million units.

Microsoft has lagged with $2.04 billion in sales and shipments of 5.2 million units but indicates that the latest Xbox Series X and Series S consoles aren't as far behind as the Ampere Analysis data suggests. However, the bottom line is that Microsoft is behind its archrival in the new-generation console battle right now, though there is more than meets the eye.

It is worth noting that Microsoft's relatively weaker sales performance is a result of demand outstripping supply. After all, revenue from Xbox hardware sales had increased a whopping 232% year over year in the previous quarter.

Microsoft had pointed out earlier this year that the new Xbox consoles could be in short supply until mid-2021, and the company reportedly underestimated the huge demand it ran into. Now that the middle of the year has arrived, Xbox supply could improve in the coming months. Throw in AMD's new tech and a bunch of new exclusive titles, and there is a chance of Microsoft reclaiming console market share from Sony.

In all, AMD could give gaming enthusiasts a solid reason to buy the new Xbox consoles over their Sony counterpart, especially considering that the PS5 is expected to remain in short supply until 2022. This would help Microsoft maintain the terrific Xbox sales momentum it is witnessing right now, and also ensure that AMD remains a top video gaming hardware stock to buy as it is supplying ammunition to both parties engaged in the console war.