AMD stock has experienced quite a surge recently after the company's second quarter earnings beat estimates. But the larger portion of its recent gains came directly after rival chipmaker Intel (INTC) released its quarterly earnings.
Intel actually surpassed earnings and revenue estimates as well, but that wasn't the biggest news to come from the company last week. Intel reported further delays in its release of advanced chips that are now set to be released in 2021 or 2022. This six-month production delay gives AMD a leg up in terms of capturing market share for those next-generation processors, which sent the stock higher.
Many investors might look at this trading trend and see it as a short-term movement that will be corrected in the near future. However, AMD stock has been rising at a rapid pace over the past five years. It is now trading at almost $70 per share share after hovering around $1.80 back in February of 2016. INTC stock meanwhile traded at roughly $30 a share at that same time and currently is below $50.
Investing in either of these stocks over the past five years would have yielded solid results but it's pretty clear the investor who bet on AMD chose correctly so far. Even though you may have missed out on a large amount of AMD’s gains so far, investing in the stock now could be a great decision.
The fact is, AMD currently has a much better product on the market when compared to Intel’s latest offerings. AMD’s Ryzen processors have set a new standard when it comes to processing speed and raw power (those who want to look at some of the technical reasons why can click here). The Ryzen is a completely new generation of processors and graphics cards offered by AMD while Intel has continued to refresh processors from previous generations with small optimizations over the last few years. Intel, no doubt, had the upper hand in the market for year but AMD has fully caught up and surpassed their biggest competitor.
The biggest reason now is a great time to invest into AMD though is that laptop manufacturers have not yet integrated AMD’s Ryzen processors into their products but now are beginning to do so. AMD stock has been surging in recent years as they improved their products but now is the time for that work to start taking effect.
Many laptop manufacturers such as Dell, HP, Lenovo, ASUS offer mostly Intel processors because they have been the industry standard, offering the best performance and stability. Now that AMD offers a superior product at a better value, these manufacturers will start incorporating AMD into their hardware.
There has been plenty of discussion and frustration in the tech world about the small number of companies offering Ryzen processors. Most tech nuts have been praising AMD’s latest offerings but it is still much harder to find AMD-powered laptops and desktops than those using Intel chips. This is due to Intel’s past performance and these manufacturers not being able to immediately implement AMD technology due to excessive costs. It is extremely costly for these companies to offer both AMD and Intel options if they don't have massive economies of scale.
Most laptops are designed with specific processor architecture that is not easily replaceable without changing the entire design. Because of this, Ryzen processors have not been readily available. This is starting to change now though Intel has failed to keep pace with AMD in terms of innovation. Now most laptop and desktop manufacturers plan to offer AMD products instead of, or in addition to, Intel.
There is a lot more hardware that goes into designing a computer than just the processor. One of the next-biggest is the graphics card that produce the images you see on screen. This is another area where AMD continues to surpass Intel. AMD make top-of the line products in both categories while, only offers an “integrated” graphics card that is less powerful but comes at a lower cost and saves power.
For most people an integrated graphics option is completely fine but having a discrete card is necessary for content creators and people who want to user their computers for video games. AMD has a huge performance advantage in this area, Intel isn't even the main competitor. Nvidia (NVDA) is the other major player in that space.
AMD’s heated competition with Nvidia is far different than the processor battle with Intel. Nvidia is generally considered the leader in this industry and AMD doesn't have the same recent surge in graphics cars that have with the Ryzen processors. Currently Nvidida still offers the most-powerful graphics cards, superior efficiency and more features in their products. AMD still has some advantages as it offers a slightly better value proposition for most consumers who are looking for a mid-tier graphics option. That said, Nvidia is still the clear leader in the industry. AMD’s upcoming Big Navi cards could potentially shift the argument but we'll have to wait until they are released to see what happens.
Investors really can't go wrong right now with either Nvidia or AMD stock as both have risen rapidly in recent years. NVDA has doubled just since October 2019. Even though AMD lags behind Nvidia in top-tier performance, their new cards may begin to challenge that crown.
Furthermore, one of AMD’s biggest advantages in the computer market is that it designs both processors and graphics cards along with other tech products. While this leads to more competition for the company, it also gives them an advantage over Intel and Nvidia in the fact they offer both pieces of hardware. This approach gives the company more market power in one of the fastest growing industries in the economy right now.
AMD has been one of the best stocks in the market in recent years and that increase in stock price and market share might just be the beginning. Investors shouldn't take this to mean Intel and Nvidia are particularly bad investments, especially with Nvidia showing no signs of slowing down. AMD, though, likely offers the best opportunity for investors at the moment.