In 2015, Advanced Micro Devices (AMD, Financial) lost almost every battle against NVIDIA (NVDA, Financial) and Intel (INTC, Financial). Moreover, in terms of graphics processing units (GPU), 80% of the market share belonged to NVIDIA while the remaining 20% went to Advanced Micro Devices.
However, 2016 has been a transition year for Advanced Micro Devices as the stock is up over 271% year to date. Furthermore, the company has also snatched an additonal 10% market share from NVIDIA and currently sits at 30%.
It looks like the company is finally headed in the right direction since its revenue surged approximately 23% year over year in the prior quarter. Throughout the past four quarters, the company managed to beat revenue estimates, clearly suggesting it still has a lot of upside potential.
The company has done numerous things right this year, but the most significant thing that helped the company move upward was the launch of its new Polaris GPU architecture.
NVIDIA also launched its new Pascal GPU architecture this year, which performed amazingly well. But Advanced Micro Devices, with the help of Polaris-based chips, became an instantaneous contender in the supercomputing and data center markets. All in all, Polaris has crafted several new growth opportunities for the company.
Moving onward, one substantial factor that puts Advanced Micro Devices ahead of NVIDIA is its presence in popular gaming consoles like Sony’s PlayStation 4 and Microsoft’s Xbox One. The company’s turnaround this year was driven by sturdy sales of its semi-custom system-on-chips (SoCs) that are currently being used in both consoles. Together, Sony (SNE, Financial) and Microsoft (MSFT, Financial) have sold approximately 62 million units; 40.75 million units of PS4 consoles and 21.11 million units of Xbox One consoles.
Keeping in mind Advanced Micro Devices’ robust growth this year, the consensus now anticipates the company can conclude 2016 with 6% sales growth, equated to a 28% drop in the previous year.
On the other hand, the virtual reality market is growing at a rapid pace, which is great news for Advanced Micro Devices since its Polaris-based graphics cards are designed to support virtual reality. Presently, Oculus Rift and HTC Vive are the two most expensive virtual reality devices available in the market. Both require high-end graphics cards in order to operate.
Initially, VR supporting PCs were priced at $1,000, but Advanced Micro Devices reduced that cost to approximately $600 with its popular RX 480 graphics cards. Both VR devices are still very expensive but the company will probably reduce prices next year. The price cut could rapidly escalate the demand for Advanced Micro Devices’ low-end VR-ready cards.
Summing up
Under the leadership of CEO Lisa Su, Advanced Micro Devices has surged over 270% year to date. However, it seems like the company still has massive upside potential. It will be another significant year for Advanced Micro Devices in 2017 because it is going to launch its new Zen architecture for central processing units.
As an outcome, investors should continue to hold the stock for further gains in the imminent years.
Disclosure: No position in the stocks mentioned in this article.
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