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Nvidia Is Gaining on AMD in 1 Key Area. What It Means for the Stocks.

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An Nvidia GeForce RTX 3080 Ti graphics processing unit.

Courtesy Nvidia

Advanced Micro Devices has steadily grown its processor business at the expense of

Intel

in past months. But the company’s graphics chips are a different story, and haven’t stacked up quite as well against the formidable technology developed by

Nvidia.

In a research note late Tuesday, BMO Capital Markets analyst Ambrish Srivastava said that Nvidia (ticker: NVDA) had taken significant market share from

AMD

(AMD). Nvidia’s share of the market for graphics processing units, or GPUs, was 81% in the quarter ended in March, 5.2 percentage points higher than in the same quarter a year earlier, Srivastava said. AMD captured 19%. The analyst said that the companies’ market shares didn’t change substantially on a sequential basis.

AMD didn’t immediately respond to a request for comment.

Both stocks advanced in Wednesday trading. AMD shares ticked up 1.4% to $81.96, as Nvidia climbed 2.9% to $669.62.

According to the data in the BMO report, which is based on statistics from Mercury Research, the average price for graphics cards rose 10% sequentially in the first quarter, as total sales ticked up 1%. Normally in the first quarter, sales drop; they fell 11% in 2020 during the same period.

It isn’t hard to understand why prices are rising and sales are steady. Like many other types of semiconductors, videogame cards are in short supply and demand is high. According to a March report in The Verge, consumers are willing to pay more than twice the normal price for many of the newest graphics cards produced by either AMD or Nvidia.

Cryptocurrency miners are contributing to the strong demand for GPUs. The figures included in BMO’s report include repurposed videogame chips used to mine cryptocurrency, and a new line of processors Nvidia has designed for crypto mining.

Nvidia

said recently it expects to report revenue of $400 million from the crypto chips in its fiscal second quarter. It has adjusted the functionality of several of its other videogame cards to make them less useful to miners.

It isn’t possible at the moment to determine the exact number of GPUs sold for mining. But Mercury co-founder Dean McCarron told Barron’s via email it is possible to figure out the maximum number of additional GPUs that could have been put to work mining ethereum in the first quarter. Ethereum is a popular digital currency people use GPUs to mine.

The maximum addition was the equivalent of 4.5 million GPUs, according to McCarron, while AMD and Nvidia sold nearly 22 million total graphics chips in the quarter. Based on his data, McCarron said that actual crypto GPUs added to mining–including Nvidia’s custom chips–was closer to 1 million to 2 million GPU units, less than half of the theoretically possible addition of 4.5 million.

Shares of AMD have declined 11% this year, as Nvidia shares notched a 29% gain. The PHLX Semiconductor index rose 14% in the same period.

Write to Max A. Cherney at [email protected]

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