NVIDIA Corp (NVDA)

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AMD VS NVIDIA - Gaming Pays Off
By: Barchart | November 11, 2022

NVIDIA (NASDAQ: NVDA) has long been a respected name in the gaming community. Known for its high-performance graphics cards or GPUs, the company has been a staple provider for PC-based gaming communities for years. Advanced Micro Devices Inc (NASDAQ: AMD), commonly referred to as AMD, has been around much longer than NVIDIA, but up until 2006 they were focused solely on processors. In the battle of AMD vs NVIDIA, the former is a much older name, but the latter has made a lasting impression.

AMD's acquisition of ATI Technologies Inc. in 2006 was a game changer for the company, allowing them to add the ability to manufacture high-powered GPUs and compete with NVIDIA. This reduced NVIDIA's stranglehold on the GPU market and gave gamers another option when building high-powered home computers.

Crypto Boom Proves Profitable

The Bitcoin and Ethereum rush also proved profitable for both parties in the AMD vs NVIDIA war, as their high powered GPUs were heavily sought after. The crypto-mining community was purchasing these products as fast as the two manufacturers could turn them out. This led to a major shortage of graphics cards, which in turn, sent prices to upwards of three times their listed MSRP. This increase in demand created a gold rush for two companies to see who could grab the biggest share of the market with each new product release.

This shortage peaked in the fall of last year, sending both companies' stock prices to all-time high water marks. AMD hit their high water mark of $155.41per share on November 15, 2021. Likewise, NVIDIA hit $333.36 per share on November 29, 2021, also marking a high point for the stock. Obviously, investors in both companies were giddy with the hope of what the future would bring.

However, a year later, we see the market has stabilized, and the shortage of graphics cards seems to have been relieved. This is due both to increased production from the two major players in the industry, as well as less demand for crypto mining machines. While gamers are relieved that GPUs are no longer being sold for 3 times their list price on eBay, investors are left holding bags that are much less full than they were a year ago.

As of the time of writing, NVIDIA stock is trading at just $138.46 per share. That is a far cry from $333 per share...in fact, it is just 42% of what it was worth a year ago. A 60% drop in value is hard for any investor to swallow. AMD is currently trading at $61.19, which is just 39% of its former value. Both teams in the AMD vs NVIDIA conflict suffered losses from their high water marks.

Taking the Long View

If we only consider the last 12 months of performance while comparing AMD vs NVIDIA, the current price leaves much to be desired when looking at what they were valued at last fall. However, we all know the stock market is best played as a long-term gain. So to get an idea of actual performance, we must look at more than just the most recent 12 months.

NVIDIA is a much younger company than AMD, having gone public in January of 1999. Its initial share price at the IPO was $12 per share. Since that time, NVIDIA stock has split 4 times, with 3 of those splits being a 2 for 1 deal and one of them being a 3 for one, according to The Motley Fool. This means that one share of stock purchased at the IPO would be the equivalent of 54 shares today. To put this into perspective, if you bought 10 shares at the IPO, it would have cost you $120. Those ten shares are now equal to owning 540 shares at the current price of $138.46. That initial $120 investment would be worth a whopping $74,768.40 today.

AMD, on the other hand, has been around in the publicly traded arena since 1972. A mere $1,000 investment would have netted you 66 shares of AMD at the IPO. Since that time, their stock has split six different times over the years. This would leave you holding 1,782 shares today. Those shares would be worth $109,040.58.

If we look at AMD vs NVIDIA in terms of who they provide products to, we are given some valuable information. We have seen just how much the blue-collar community can affect the stock market in recent years. The infamous GameStop Corp (NYSE: GME) debacle of 2021 showed the world that the average Joes could come together to heavily affect the prices of stocks they favored. When a group of investors from a forum on Reddit decided to force a change in price for GameStop, they began manipulating large numbers of shares. This drove the price up, turning some of them into millionaires almost overnight. However, this move also falsely inflated the company's value.

For the two major manufacturers of high-powered gaming machine components, the effect of the average Joe is felt every single day. Gamers of all walks of life purchase the products made by these two companies on a regular basis. So, how does this help determine where to place money when investing in the two companies? Is there sufficient evidence to support investing in them after the crypto boom has slowed down? Are either of the two giants in danger of going belly up in the near future? These are the questions every investor must ask themselves before placing their money on the roulette wheel the stock market has become over the last two decades.

The Race Into the Future

Advanced Micro Devices Inc struck a deal in 2019 with tech giant Google (NASDAQ: GOOG). The deal set AMD up to provide GPUs for Google's new Stadia game streaming service. The service claimed to allow gamers with very moderately built PCs to be able to play extremely demanding games by live streaming the graphics in a pre-processed form. This meant the average desktop computer could now play very graphic-intensive games that normally would not be possible. This seemed like a huge move toward the future for both Google and AMD; however, The Verge reports that in January 2023, Google will be shutting Stadia down. What was thought to be the future of gaming now appears to be on its way to becoming a distant memory. Does that spell a major market share loss for AMD?

While this means AMD loses the share of the market that Google would have been purchasing to support the Stadia servers, it does not spell doom for the company. AMD's biggest share of the market lies in the GPUs it sells to consumers. AMD products usually come in at a lower price point than NVIDIA but tend to offer similar performance and, in many cases, exceed the competition's abilities. This makes them very desirable to budget-conscious PC builders.

Earlier this month, AMD revealed its newest line of GPUs in the RX7900 series. The company claims it is the most advanced line of GPUs on the market. Coming in at a price point of $899 for the RX7900 XT and $999 for the RX 7900 XTX, PC Gamer says the $100 price point difference definitely makes the more powerful card the one to buy. These two cards offer gamers the ability to play any game on the market now and seem to be future-proofed for several years as well. This means that AMD will hold a large share of the market in the coming months.

NVIDIA is not one to be caught off guard by AMD, and they will be launching their 40 series GPUs later this month. Both the 4080 and the 4090 offer huge performance boost above the current 30 series that make up their top-of-the-line cards. The 40 series offer substantially less VRAM memory than the AMD counterparts, but they also have a higher clock speed, which makes them desirable for games that need a super fast GPU. Dexerto reports that the 4090 will match AMD's RX7900 XTX in VRAM, with a whopping 24GB, while the other models in the series will offer less than their AMD competitors. The top-of-the-line RTX4090 will retail at $1,499, a full $500 above its AMD equivalent.

This inequality in pricing shows that AMD vs NVIDIA is not only a battle for market share but also to produce the best product at the lowest price. Many gamers are diehard NVIDIA users. They will not use hardware manufactured by AMD, largely due to issues AMD had with its initial partnership with ATI in the early 2000s. Many of the early models they released were underperformers at best. However, AMD has stepped its game up over the last decade and proven to be a worthy competitor.

NVIDIA will retain a huge market portion simply due to owner loyalty. However, as the economy is not at its strongest and many people are looking for money-saving options without giving up their comfortable lifestyle, many gamers will turn to AMD to get performance gains at a lower price point.

Both Companies a Solid Investment

Gaming is here to stay, and PC gaming is growing by leaps and bounds. The number of people live streaming games from their PC is growing every day, and the need for GPUs is increasing. Both companies are an investment that will continue to pay off. Yes, the crypto boom is over, and the fast profits from that are done.

However, there is still plenty of profit to be made in the daily sales of GPUs, which both of these companies manufacture on a daily basis. While we see the stock at a much lower price point than it was this time last year, both companies have proven they will continue to be around for years to come.

Each new product release is met with high demand, and pre-orders for them are at an all-time high. It is safe to assume that both companies will continue to meet strong consumer demand and bring investors nice profits in the coming months and years.

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