While much of the attention was on Advanced Micro Devices' (AMD 3.04%) artificial intelligence (AI) efforts when the chip company reported second-quarter results on Tuesday, gaming remains an important business. AMD competes with market leader Nvidia and new entry Intel in the gaming GPU market and has been losing ground in recent quarters.
AMD's graphics card unit market share fell to 12% in the first quarter of this year, cut in half from the prior-year period. Nvidia dominated with an 84% share, while Intel made inroads with a 4% share.
The overall market for gaming GPUs is weak right now. Total GPU shipments tumbled 38.2% year over year in the first quarter.
The situation didn't improve for AMD in the second quarter. AMD's gaming-segment revenue was $1.6 billion, down 4% year over year and down 10% sequentially. Within the gaming segment, revenue from semi-custom game console chip sales grew, so revenue from gaming GPUs may have suffered a steeper decline than the segment, as a whole.
Expanding the lineup
Given this backdrop, it's not surprising that AMD hasn't been all that eager to launch new gaming GPUs. There's still plenty of last-gen inventory floating around and selling at discounted prices, so any new graphics card faces competition not only from Nvidia and Intel, but also from AMD's Radeon 6000 series.
AMD has only launched three graphics cards as part of its latest Radeon 7000 series: the high-end RX 7900XT and 7900 XTX and the midrange RX 7600. The first two cards were launched late last year, while the midrange option came in May.
The RX 7600, a mainstream part that goes after a high-volume portion of the market, was a bit of a dud. Reviews were mixed, with the new card barely beating AMD's last-gen cards, which now sell for lower prices. While this is only one data point, the RX 7600 first shows up on Amazon's list of best-selling gaming graphics cards in the No. 65 position. It doesn't show up at all on Steam's hardware and software survey.
With a huge gap between the $269 RX 7600 and the RX 7900 XT, which currently sells for around $800, AMD has been leaving an enormous chunk of the market to its last-gen cards. This situation will change in the third quarter. During the company's second-quarter earnings call, CEO Lisa Su disclosed that new "enthusiast-class" RX 7000 graphics cards are coming in the third quarter.
This likely means that AMD will be launching RX 7700 and RX 7800 graphics cards in the next couple of months. AMD currently has nothing except last-gen graphics cards that compete with Nvidia's newest RTX 4060 Ti, which sells for around $400. AMD will almost certainly launch something around that price point.
A weak third quarter is still expected
Despite the impending launch of AMD's new graphics cards, the company expects the third quarter to be even worse for its gaming GPU business, compared to the second quarter. AMD expects the gaming segment to decline on both year-over-year and sequential bases. The semi-custom portion of this segment is seasonally strong during the third quarter as game-console inventory ramps up for the holiday season, so this outlook implies an extremely weak performance from the gaming GPU business.
The data center GPU business has the potential to perform much better for AMD as the company preps its MI300 accelerators to go after the AI market. But gaming is still an important piece of AMD's business. Even with new products coming, it looks like the gaming segment will continue to struggle.
