Tech investors are closely watching NVIDIA (NVDA, Financial) as the chip manufacturer is all set to report its quarterly earnings today. With Advanced Micro Devices (AMD, Financial) having delivered better-than-expected earnings, investors are expecting NVIDIA to deliver as well, especially since the company has a habit of performing better than AMD.
AMD rallied over 40% after the results, and while the company did do well in the last quarter, investors shouldn’t expect its rally to last long as AMD still faces many difficulties going forward.
Pascal arrives earlier than Polaris
As per AMD’s recent quarterly results, its upcoming Polaris architecture would not focus initially focus on the high-end graphics cards market. The company’s two graphic card versions Polaris 10 and Polaris 11 will aim at the notebook segment and the mainstream desktop segment respectively, along with the objective to facilitate virtual reality apps at ordinary prices.
However, nothing can be said about the exact performance of the Polaris architecture until the company launches its new products based on Polaris architecture. But since AMD is targeting a specific audience, it can be said that NVIDIA’s high-end GTX 1080 may not have a new challenger this year.
The company’s emphasis on the mainstream may be a problem of funds. On the other hand, NVIDIA detailed that designing and developing of Pascal architecture required a huge amount of resources and development expenditures, along with thousands of people functioning on the project for approximately two years.
Apart from this, NVIDIA’s R&D expenses has surged throughout the last few years and reached almost $1.3 billion in FY 2016 compared to just $950 million expended by AMD. The company has reduced R&D expenditures during the recent years as it has wriggled with increasing losses.
NVIDIA has moved into the action faster than AMD and has already launched its new Pascal architecture. Therefore NVIDIA already has a head start and will soon launch mainstream Pascal grounded graphics cards in the approaching quarters.
ZEN architecture
AMD’s new ZEN architecture will be launched during the fourth quarter this year. However, the company is not alone in the CPU market and will thus face tough competition from Intel’s (INTC, Financial) Kaby Lake architecture.
The company claims that ZEN architecture will be a big enhancement contrary to its Excavator architecture, but the success of the architecture can only be known after it is launched.
Conclusion
AMD has always struggled against big-name competitors and that trend will likely continue. Investors shouldn’t believe in the company’s turnaround story just because of its quarterly results, as AMD is still in troubled waters.
Disclosure: The author doesn’t have any position in the stock mentioned in the article.
