Nvidia Beats AMD Again: Here’s Why It’s Great News For Nvidia Shareholders


Actions of Nvidia (NASDAQ: NVDA) have nearly quadrupled their price since the start of 2020 thanks to strong demand for its powerful graphics cards that power a variety of applications, including personal computers, data centers, and self-driving cars.

The chipmaker’s dominance in the lucrative video game market is one of the main reasons it has seen such tremendous revenue growth in recent quarters. Video game revenues jumped 85% year-over-year in the second quarter of fiscal 2022 to $ 3.06 billion. The segment produced 47% of total revenue in the last quarter, so it’s shaking things up for the company.

NVDA data by YCharts. TTM = 12 rolling months.

The good news for Nvidia investors is that the games industry will continue to fuel its growth. His closest rival, Advanced micro-systems (NASDAQ: AMD), is failing to grow in this multibillion-dollar space, according to the latest market share figures from Jon Peddie Research.

Nvidia crushes AMD in graphics cards again

Peddie’s research highlights that Nvidia’s share of the discrete graphics processor (GPU) market was 83% in Q2 2021, with AMD holding the rest. This is an improvement from the 81% market share held by the company in the first quarter and 80% in the second quarter of 2020. It should also be noted that it has reclaimed a substantial market share from AMD , since the latter held nearly 31% of the market share. the discrete GPU market in the first quarter of 2020.

Man and woman looking at a computer screen.

Image source: Getty Images.

There are two reasons why Nvidia has crushed AMD in the graphics card market in the past year. First of all, it brought a big leap in performance with the RTX 30 series cards based on the Ampere architecture that were released a year ago. The new cards offer serious performance gains at aggressive prices, triggering an upgrade cycle that has led to huge demand and a shortage of supply.

Ampere is Nvidia’s fastest growing gaming GPU architecture, with sales of cards based on this platform growing twice as fast as previous generation Turing cards in the first few months of launch. More importantly, players pay more money; The average selling price of Ampere cards at launch was $ 360, compared to $ 300 for Turing cards at launch.

Nvidia is still struggling to meet the massive demand for RTX 30 cards. CEO Jensen Huang noted on the August earnings conference call that “a tight supply environment for the vast majority of the year. next “is likely. Despite this constraint, the company is doing well to increase its market share for GPUs.

This brings us to the second reason why it jumped on AMD. Huang explained in the August earnings call that the company has secured and continues to guarantee “fairly large long-term supply commitments.” This is probably the reason why third-party sources note that Nvidia has increased the frequency of replenishing its cards in Europe and the United States.

Additionally, the chipmaker has taken steps to ensure its cards reach gaming enthusiasts rather than cryptocurrency miners by limiting the mining capabilities of popular RTX 30 series cards. , AMD’s cards have been difficult to secure, which appears to have contributed to its declining GPU market share.

According to a report from the game distribution platform Steam, the flagship RTX 3090 GPU on its own has sold more units than AMD’s entire RX 6000 series line of cards. This shows the strength of Nvidia’s supply chain, pricing power and installed base. These factors could help it maintain its impressive gaming growth in the future.

Massive market share could drive long-term growth

It won’t be surprising to see Nvidia continue to hold over 80% of the discrete GPU market for a long time to come. One reason could be that 80% of the company’s installed base of gaming GPU users has yet to upgrade to Ampere-based cards. As the chipmaker brings more supply to the market to increase the availability of its latest boards, its sales could continue to grow at a rapid rate.

Additionally, Nvidia is expected to launch a new generation of graphics cards next year that could be based on a more advanced manufacturing process, giving gamers yet another reason to upgrade. All of this could help it dominate the GPU market in the long run. Today, the graphics card market is expected to generate $ 54 billion in revenue by 2025, up from $ 23 billion last year, indicating that Nvidia’s largest company is designed for long-term growth. and will help the chipmaker to remain a growth company to generate more potential. .

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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