As Nvidia Struggles, So Do AMD and Intel

If you've taken a peek at Nvidia's stock recently (NVDA) you may have noticed that it is trading at $11.82, down some 33% from a week ago, and down 66% from its 52 week high. What gives?

Last week Nvidia had a pre-earnings announcement warning that revenues and margins wouldn't meet analysts expectations. Its reason?

"The estimated decrease in revenue and gross margin is due to several reasons: end-market weakness around the world, the delayed ramp of a next generation MCP, and price adjustments of our GPU products to respond to competitive products," the company said in a statement.

MCP stands for Media and Communications Processor. For those that are unfamiliar with the industry, Nvidia is simply referring to a new "platform" for its processors. The big thing here is the "price adjustments of our GPU products." This is because Nvidia has but one competitor, Advanced Micro Devices (AMD).

Late last year, when AMD was announcing constant delays to its products, many if not most people counted AMD out of the race for the next generation of chips. But despite all of the drama over people calling for AMD CEO, Hector Ruiz, to resign, AMD has chugged along and quietly released its next generation mobile CPU + graphics platform--PUMA.

Puma has definitely impressed critics. It is being featured in a brand new laptop from HP (HPQ) called the dv5z. Here is an excerpt from a review of the laptop by

NotebookReview.com

In short, AMD and ATI just murdered the low-end dedicated graphics card market. There's absolutely no reason to buy a laptop with a low-end dedicated graphics card like the NVIDIA 8400m GS because the new ATI integrated graphics solution performs just as well (if not better) at a fraction of the cost.

One would imagine that weakness in Nvidia due to competition might mean an uptick in AMD's share price. That isn't the case. AMD, although doing well in the graphics department, is still lagging Intel (INTC) in CPU technology. AMD's next generation PUMA actually consumes more battery life than before. This is a huge no-no for laptops, which already don't stay on long enough (mine is about to run out of batteries as we speak!)

Furthermore, AMD recently released its top of the line desktop CPU to very little fan fare. The title of the article from Engadget says it all:

AMD's flagship Phenom X4 9950 BE announced: Intel laughs, points

As you'd hope from AMD's flagship desktop CPU, the X4 9950 is faster across the board than the previous AMD title holder, the X4 9850, albeit, just 5%.

AMD continues to lag Intel in terms of performance per watt as well.

Another very logical conclusion is that because of AMD's continued underperformance in the CPU market, Intel might find strength in its stock. That's also false.

The overall conclusion? Chip makers is not where you want to be right now, as an investor. Competition = lower share prices for all that are involved.

But for consumers, and the rest of the world AMD should serve as a reminder of what competition really means. Cheaper toys for everyone!

Disclosure: None

 

Comments

[AMDMAN]

All Nvidia G84 and G86s are bad
www.theinquirer.net/gb...

[OrangeValueInvestor]

that guy at the inquirer is suc*** AMD's di** and has been forever......I wouldnt pay too much attention to what he has to say....

[AmesTiedeman]

I would not be shocked if INTC buys NVDA.

[morgan77]

If you're interested in getting in long term and can handle a little risk NVDA is a good buy for you. Read an article in which the author is expecting significant upside in NVDA over the next 1 to 2 years.
Hope it helps the fellow investors out there:
www.greenfaucet.com/tr...