Advanced Micro Devices (NASDAQ: AMD) has been in hot water late due to the diminishing demand for graphics cards used in cryptocurrency mining. Higher inventory levels cause graphics card prices to return to normal levels and damage AMD's economy.
The company's top and bottom lines are expected to decline slightly in the fourth quarter. By comparison, AMD's turnover had increased by 33% annually in the same period last year, and it had produced a good result, against a loss in the previous period. It is natural for AMD investors to be concerned about this downturn, but they should not forget that the company is making the right moves in another important area of Intel s (NASDAQ: INTC) [NASDAQ:INTC)
AMD keeps chipping away at Intel's CPU dominance
Central processors (CPUs) have proven to be Intel's fiction so far. The chipmaker has dominated this market in recent years, but AMD's Ryzen CPUs change it. There were clear signs that AMD cut into Intel's CPU market share at the end of 201
Mercury Research estimates that AMD's desktop CPU market share increased to 13% in Q3 2018, up from 9.1% in the previous period. The company was able to close the year with higher market share, as recent reports indicate that it handles Chipzilla's CPUs by 2 to 1 in Europe.
Germany's largest online computer hardware store, Mindfactory.de, recently revealed that it sold 16,000 AMD processors in November versus fewer than 8,000 Intel chips. AMD's CPU sales through the site almost doubled on an annual basis. Mindfactory.de had revealed in July that AMD Ryzen CPUs are selling at the level of Intel's chips.
Mindfactory.des numbers do not present the whole picture, but they give us an idea of the shift of momentum in the CPU market from Intel to AMD. The German website is known for constantly providing updates on CPU sales, and the numbers this year have indicated that users prefer AMD over Intel.
Turns up the heat in 2019
AMD's CPU market share has been stable so far, and the company will probably get it up in 2019 thanks to new chip architecture. AMD will officially uncover its 7-nanometer CPUs based on the Zen 2 architecture of the CES 2019 electronics program in January in Las Vegas, giving it a start over Intel, whose competing 10nm platform will not reach the end of next year.
Intel has already missed some deadlines on its next generation architecture and it is possible that the 10nm products will not arrive by 2020. This gives AMD an advantage because a small production node will allow more efficient CPUs with more computing power and greater efficiency in power consumption.
By 2020, AMD is planning to optimize the 7nm architecture to further improve the efficiency of the Zen 2 platform. So the company could have turned its architecture on when Intel comes to market with its competing chips. As such, it will not be surprising to see AMD gain market share at a much stronger pace when Zen 2 CPUs are available.
CPUs can help AMD turn around
According to a DigiTimes report, AMD could end 2018 with 30% of the global CPU market thanks to production delays on Intel and the favorable demand for AMD's Ryzen chips. It looks amazing, as the company had not reached even half of this projection in the third quarter, but I would not be surprised if it came close to that mark in 2019.
AMD's total sales are expected to rise above 7% by 2019 despite for a forecast of turnover declines over the next two quarters. As such, the company's growing migration in the desktop CPU market can help offset the GPU's weakness and regain lost investor confidence by boosting revenue growth next year.
Harsh Chauhan has no position in any of the aforementioned shares. Motley Fool has no position in any of the aforementioned shares. Motley Fool has a disclosure policy.