Nvidia v AMD in Three Charts

[Opinion] Nvidia has always had the upper hand on pricing compared to AMD, but the current AI boom may not be representative of the long-term story

Good Morning from Taipei,

For the better part of two decades Nvidia has had two major competitors; Intel and AMD. The latter became a direct rival when it bought ATI in 2006, the only other major supplier of discrete graphics processors (GPUs). By contrast, Intel builds graphics into its central processing units (CPUs), which it calls integrated graphics.

Nvidia wasn’t always ahead. It overtook AMD by revenue in 2015, though that’s not quite a fair comparison: AMD was primarily a CPU business focused on mainstream PCs and servers, Nvidia focused on the niche graphics sector. But now the niche and the mainstream have flipped, and the Green Machine has taken off.

What’s most compelling about the Nvidia story is that it’s always had pricing power, as evidenced by gross margins that sit well above 50%. High prices act as a great buffer against downturns, but also ensure amazing operating leverage during boom times.

A Black Swan event is one that’s considered very rare, but when observed makes us rethink everything. Nvidia’s massive spike in revenue and profit from AI may be just that: a brief occurrence during which the GPU maker is the chief driver of AI hardware. But if AMD catches up, or Nvidia’s bubble bursts, then this may be less a Black Swan moment and more like a brief moment in spotlight.

Thanks for reading

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This week I published Part I of a two-part investigation into AMD’s landmark yet ultimately disastrous split between design and manufacturing:

AMD Split Shackled Chipmaker for a Decade, Investigation Shows

Subscribe now to ensure you receive Part II, which outlines how shareholders lost out, year after year, and why this matters for the future of Intel and the US semiconductor industry.