The wait for new graphics cards from Advanced Micro Devices (AMD -0.30%) is nearly over. After losing quite a bit of market share to rival NVIDIA (NVDA -3.40%) over the past few quarters, AMD is expected to launch new products by the end of June. NVIDIA has had the high-end of the market mostly to itself after launching the GTX 970 and 980 last September, and the GTX Titan X in March -- AMD desperately needs to reclaim some market share.

But putting out competitive hardware will not be enough. A little more than one year ago, NVIDIA officially introduced GameWorks, a set of tools and code libraries that provide game developers with the ability to easily integrate advanced effects into their games. I wrote last year that GameWorks had the potential to give NVIDIA a competitive advantage in the GPU business. With the hoopla surrounding the recently released PC game, The Witcher 3, and its use of GameWorks, it appears as though that is exactly what's happening.

NVIDIA has a software advantage
Software has always been important in the GPU business in the form of graphics drivers. This is the software that allows a PC to communicate with the GPU itself, and both AMD and NVIDIA continually update their drivers to work better with new and existing games.

However, you only have to look at the NVIDIA and AMD support websites to see that NVIDIA provides driver updates far more frequently. The latest official NVIDIA driver was released on May 18th, providing a variety of fixes and optimizations for The Witcher 3. On the other hand, the latest official AMD driver was released all the way back in December of last year, and its latest beta driver, which provided optimizations for Grand Theft Auto V, is more than a month old.

This discrepancy may simply be an issue of resources. AMD used to provide monthly driver updates, but it ended that practice back in 2012. This coincided with the beginning of a three-year streak of annual losses for the company, one which may turn into a four-year streak in 2015.

While NVIDIA and AMD routinely work with game developers to optimize games for their respective hardware, GameWorks takes things one step further. GameWorks provides code for advanced effects like soft shadows, high-quality skin shading, and the simulation and rendering of realistic hair and fur. These are all complicated and computationally intensive effects, and GameWorks saves developers from needing to reinvent the wheel.

GameWorks is obviously optimized to work best on NVIDIA hardware, and in certain cases, it works very poorly on AMD hardware. The Witcher 3 makes use of GameWorks' hair and fur rendering, and the developer has stated that it encourages users of AMD GPUs to disable the feature completely, because performance may be unacceptable due to the lack of optimizations with AMD hardware.

AMD is working on new beta drivers that fix these performance issues, but it may be too little, too late. GameWorks' hair and fur rendering was demoed in The Witcher 3 last year, so AMD had plenty of time to develop optimized drivers that were ready to go at launch. Again, a lack of resources compared to NVIDIA was likely the main issue.

What AMD needs to do
New GPUs alone will not solve AMD's market share problems. GameWorks and other NVIDIA technologies are finding their way into an increasing number of PC games, and AMD needs to fight back with its own software. AMD's Mantle, the graphics API that the company developed as an alternative to DirectX, is now dead. Although it certainly influenced the development of DirectX 12, it did nothing to boost sales of AMD products, as I previously predicted.

AMD needs its own version of GameWorks. It needs to release optimized drivers at the same frequency as NVIDIA, and it needs to ensure that any performance issues are resolved before games are launched, not after. With AMD currently unprofitable and its resources spread across various businesses beyond graphics, catching up with NVIDIA on the software front will be a challenge, to say the least.