The latest market share numbers from the x86 processor space don't paint a bright picture for Intel (INTC +1.07%) as it seems to have lost more ground to rival Advanced Micro Devices (AMD +3.50%).
According to market research firm Mercury Research, AMD's share of the x86 processor market -- which includes processors used in servers, laptops, and desktops -- increased to 24.6% in the third quarter. That's a sequential jump of 2.1 percentage points. This reading is the second-highest share AMD has ever seen in x86 processors, after the 25.3% share it achieved in the fourth quarter of 2006. It is also worth noting that AMD reached an all-time record market share of 22% in notebook processors.
AMD's latest gains aren't a big surprise. The company had pointed out on its October earnings conference call that it has logged six straight quarters of revenue share growth in the CPU (central processing unit) market. This is bad news for Intel since the company has struggled to stop its market share decline on account of AMD's technological advantage.
However, it wouldn't be shocking to see the tide turn back in Intel's favor fairly soon. Here's why.
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Intel may have an answer to AMD's dominance
Chipzilla recently launched Alder Lake CPUs based on an enhanced 10-nanometer (nm) process that the company calls Intel 7. This is a big deal for the chipmaker as its failure to jump from the 14nm process to the 10nm process had given AMD a free hand in the CPU market.
However, that seems to have changed now. The 10nm Alder Lake chips will help Intel bridge the technology gap with AMD to some extent as the Intel 7 process on which the new chips are based reportedly has a comparable transistor density to AMD's 7nm manufacturing process. Thus, Intel is able to price its latest chips aggressively.
Additionally, Intel has packed the Alder Lake processors with a combination of performance cores and efficiency cores to take the game to AMD. For instance, Intel's Core i9-12900K processor is priced at $589, between AMD's top-of-the-line Ryzen 9 5950X and the Ryzen 9 5900X that are priced at $799 and $549, respectively. Third-party benchmarks from Tom's Hardware indicate that the Core i9-12900K processor gives AMD's chips a legitimate run for their money.
What's more, the cheaper offerings in the Alder Lake lineup also give AMD's pricier processors a close fight. The Core i5-12600K processor that's priced at $289 can run a popular gaming title such as Red Dead Redemption 2 at an average of nearly 151 frames per second (FPS) using DDR4 DRAM (double data rate 4, dynamic random access memory) at 1440p resolution. Meanwhile, the AMD Ryzen 9 5950X can run the same title at almost 154 FPS, but it is much pricier than its Intel counterpart.
A similar scenario unfolds in other titles such as Flight Simulator, Watch Dogs: Legion, and Hitman 3 while the Core i9-12900K also outperforms its pricier AMD competitor across several titles tested by Tom's Hardware. Not surprisingly, AMD's Ryzen processors are reportedly getting price cuts so that they remain competitive with Intel's latest offerings.
In all, Intel seems to be pulling the right strings with its latest CPUs, and that could help stop the market share losses that it has been suffering.
Why this could be a big deal for investors
Intel investors, however, shouldn't expect the Alder Lake chips to turn the company's fortunes around in an instant like a magic wand. That's because the latest chips do have some drawbacks, such as high power consumption. AMD's processors are more power-efficient than Intel's, so Chipzilla needs to make progress on that front.
The upside is that Intel's latest chips offer additional advantages such as the support for faster DDR5 memory. As such, performance-oriented consumers could very well go for Intel's chips and help the company take some business back from AMD. This could trigger a much-needed turnaround in Intel's client computing group (CCG) business that suffered a 2% year-over-year revenue decline in the third quarter to $9.7 billion.
CCG is Intel's largest revenue stream with 53% of the last quarter's total sales, and it is showing signs of improvement. The average selling price of Intel's desktop and notebook processors increased 4% and 10% year over year, respectively, in the third quarter. The Alder Lake chips can help Intel sustain its momentum and improve the performance of the CCG business. As such, don't be surprised to see a turnaround taking place at Intel as the semiconductor giant may have found an answer to AMD's threats.
