AMD’s New GPU Launch Unlikely to Spark Continued Market Share Gains

January 5th, 2011 by Trefis Team
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AMD (NYSE:AMD) and Nvidia (NASDAQ:NVDA) are market leaders when it comes to the discrete graphics business. We estimate that discrete GPU business constitutes roughly 12% of AMD’s stock value, including about 7% from discrete desktop GPUs and the balance from discrete notebook GPUs. Our price estimate for AMD’s stock currently stands at $7.74, which is about 12% below the market price.

AMD recently launched its most advanced enthusiast GPU ever under the Radeon HD 6900 series. Will the new launch continue the company’s momentum of market share gains?

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Market Share Gains

We estimate that AMD’s market share in discrete desktop GPUs jumped in 2010 after a consistent decline since 2005. This market share gain was driven by success of its Radeon HD 5000 series. Towards the end of 2009, AMD had a head-start in the DirectX 11 desktop graphics market, which facilitated a gain in market share. We believe that AMD’s discrete desktop GPU market share increased to 41% in 2010, off of 2009 levels below 34%.

AMD has also grabbed market share in the discrete notebook GPU market as well. We estimate that its market share has increased from 38% in 2007 to about 58% in 2010.


New Launch May Not Be Good Enough

There are a few concerns with AMD’s recent launch of its Radeon HD 6900 series GPU. In terms of performance, AMD’s product still does not match the caliber of Nvidia’s GeForce GTX 580. Additionally Nvidia launched GeForce GTX 580 at the beginning of November 2010, giving the company a head-start on establishing its product during the holiday shopping season. [1] Could this advantage allow Nvidia to regain lost market share from AMD?

High-end GPUs contribute siginificantly less to overall GPU sales vs. low and mid-level GPUs. Thus, the impact from a late launch of a single high-end GPU is likely to be limited. However, as the discrete GPU space is effectively a two-man battle between AMD and Nvidia, success often boils down to the image of being technologically superior. Therefore, while having the best high-end GPU may not be much of a direct factor, it does affect company-wide image, which can seep into perception of a company’s low and mid-level GPUs.

Can Nvidia regain its share from AMD or will AMD continue to drive share gains? You can modify our charts above to see the impact of your market share expectations on AMD’s price estimate.

You can see the complete $7.74 Trefis price estimate for AMD’s stock here.

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Notes:
  1. AMD Radeon vs NVIDIA GeForce: Last Stand for Graphics, benchmarkreviews.com, 15th Dec 2010 [↩]