The CPU and GPU Wars - AMD vs INTEL vs Nvidia
Companies / Tech Stocks Dec 31, 2020 - 02:19 PM GMTBy: Nadeem_Walayat
This is a continuation of my in-depth analysis into the buying levels for the Top 10 AI stocks to ride the electron mega-trend the whole of which was first made available to Patrons who support my work so immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $3 per month.
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NVIDIA - AMD - INTEL
AMD is CRUSHING it's competition into smithereens, namely INTEL, which I have been flagging the the demise of at hands of for several years and there is no sign of any end to Intel's CPU woes anytime soon, not for 2021, and I don't see any thing visible for the first half of 2022 either, maybe by late 2022 Intel will have managed to pull a rabbit out of its hat and begin it's fight back? We will have to wait and see. in the meantime the AMD gold rush continues, where the stock has literally risen from pennies a few years ago to eye an assault on $100!
However, AMD was not done with delivering Intel a knock out punch for they firmly eyed loosening Nvidia's iron grip on the GPU market and so on release of 6000 series of RDNA2 GPU's AMD has caught up to Nvidia, matching Nvidia blow for blow, roughly where AMD was against Intel 2 years ago. This must have Nvidia worried because AMD's 6000 series are performing much better than anyone expected! For instance before release I imagined AMD would come in at roughly 15% to 20% behind in performance, instead AMD is neck and neck with Nvidia! And remember this is AFTER Nvidia beat expectations with its RTX 3000 series cards released only 2 months ago! So for AMD to come up from way behind Nvidia and match their newest cards is truly remarkable! Its been literally well over a decade since we have seen such developments in the desktop PC world, with likely more innovations to come over at least the next 2 years, all courtesy of the increasing deployment of AI in design of processors.
Of course where GPU's are concerned Nvidia is still the market leader as it will take at least a couple of years of AMD beating Nvidia to get the market to start to make the shift, just as 2 years ago AMD had less than 20% of the desktop CPU market, whereas today it has likely just passed the 50% mark on release of the Ryzen 5000 series of processors.
So for AMD to do to Nvidia what its done to Intel is going to take similar leaps in performance in future generations AND Nvidia stagnating in it's own product development for which there are no signs of at this time, so it does not look like AMD will do to Nvidia what they have done to Intel but instead will take greater market share of an ever increasing market pie so both companies should continue to win, especially when one looks at the prices they are both charging for their GPUS, for instance the RTX 3080 costs at LEAST $699 and the 6800XT costs at LEAST $649 because given unprecedented demand most people looking to buy today are being forced to pay a premium depending on what AIB stock is available.
Following release of RTX 3000 I was gong to get an RTX 3080 for my next PC build, but now I am not so sure, especially given Smart access memory that allows AMD CPUs to access all of their GPUS memory rather than in small chunks, which gives a further small performance boost of upto 4%. Though AMD is still a generation behind Nvidia's DLSS (neural net resolution up scaling, that's right Nvidia GPU's have out of the box active machine learning!) and Ray tracing, that and most productivity software is optimised for Nvidia GPU's cuda's etc. So even if one of my primary applications was not machine learning then I would still go with Nvidia which I guess is what most people weighing up the pro's and cons will also do regardless of what some benchmarks suggest in terms of gaming FPS.
Anyway we are in for at least a couple more years of fast pace development in both the CPU and GPU world due to intense competition prompting innovation that follows CPU's innovation having stagnated for a good 6 years and GPU's for a good 3 years due to lack of market competition. AMD has won the CPU war against Intel and are right now engaged in a GPU war with Nvidia that as things stand Nvidia is still just managing to be winning.
So this IS a great time to consider upgrading your ageing desktop machines to a new rig!
In terms of stock price prospects then there is a small fly in the ointment and that is lack of supply of CPU's and GPU's, both AMD and Nvidia are failing to meet demand which is several orders of magnitudes greater than supply i.e. from, X10 to X50 supply for CPU's and GPU's so which of the two can get their act together and ramp up production sooner will reap the rewards in terms of surge in revenues, for revenues cannot surge if they are unable to manufacture enough stock to meet demand.
8. NVIDIA
Which stock has performed the strongest since the great corona crash? NVIDIA! Up over 225% to it's recent high of $589 all discounting it's latest 3000 series RTX GPU's that unlike Intel delivered what they promised which as I pointed out at the time of launch in September means Nvidia can literally print money, sell as many GPU's as it can produce! Unfortunately supply has been lacking to meet even 10% of the demand for these ground breaking GPU's. Which despite AMD also excelling, still are the market leaders.
Nvidia trades on an eye watering EC of 173 up from 134, clearly a stock that has been built up on the hype of the RTX 3000, and that's after the stock has already corrected some $60 from it's highs!. Nvidia is expensive, but unfortunately could continue to remain expensive for some time given the lack of supply of GPU's with perhaps Q1 2021 being when the revenues surge enough to make Nvidia a more reasonable buy. Still the long-term trend trajectory for Nvidia remains for much higher stock prices as long as Nvidia continues to beat GPU expectations. Given it's growth rate if the stock did nothing then Nvidia's EC would halve to about 85 in a years time, which implies that Nvidia will trade to new all time highs above $580 during 2021.
The Nvidia stock once more illustrates the point of I have been making all year that of being very careful when contemplating selling out of the best AI stocks as the pre corona crash peak of $316 is fast being becoming a minor blip on the chart, so all those weak longs who sold out at say the $350 new high will be kicking themselves for making that mistake. Nvidia stock tends to trend well which is a sign of a corporation that delivers consistently strong earnings growth so definitely an AI stock to have exposure to and given the continuing demise of Intel, Nvidia nudges higher to number 8 on my list.
Nvidia has fallen out of it's uptrend channel which should not be so surprising given it's unsustainable nature that has pushed Nvidia to extremely overbought valuations that are now likely to have Nvidia parked in it's current channel of between $580 and $480 for at least a quarter whilst earnings play catchup. Therefore Nvidia's buying level is at $480.
9. AMD $85.3
AMD is on a roll, thrashing Intel in the CPU market which looks set to continue into at least early 2022, whilst succeeding in playing catchup to Nvidia's GPU's. AMD's eye watering valuation has been moderating in the face of a surge in earnings that looks set to continue for a good 15 months with the EC falling from 317 to 137. ! In fact just like Nvidia AMD is unable to meet demand for either it's Zen 3 processors or 6000 series GPU's with any stock on the market selling at inflated prices well above MSRP.
As was the case from April to July, it looks like that AMD is set to trade in it's current range of $94 to $75 for some months before the next surge higher to well above $100. So those still looking to accumulate in this emerging chip giant have a short window of opportunity to do so especially given the amount of revenues AMD looks assured to achieve during 2021. Therefore the new buying level for AMD is $78.
10. Intel
Given what you have read so far then it should not come as much of a surprise as to why Intel stock is trading at not much distance from it's March crash low of $43 whilst most other AI / tech giants are trading away from recent all time highs. In terms of EC valuation Intel is now -1 which illustrates investors having jumped ship from a potentially dying stock that has FAILED to deliver in competitive CPU innovation for a good 5 YEARS! Which is the real reason why Intel is dying, as AMD has come from nowhere and took Intel's place as the new x86 CPU giant.
The chart shows Intel is suffering the PAIN of losing in the CPU war to AMD. With another major nail in Intel's coffin being Apples shift to using it's own ARM processors. However, before you all rush to sell, in financial terms Intel is cheap on an EC of -1 (8)! That's a lot of bad news baked into the stock price, so any good news would send Intel stock soaring, it's just that I can't see anything on the horizon until at least early 2022. So investing in Intel is betting on Intel eventually pulling a rabbit out its hat perhaps during 2022.
There is heavy support at $43i.e. just below the current price of $46. Add to the fact that Intel on an EC of -1 has the market already discounting a lot of bad news which means downside should be very limited and so Intel could surprise to the upside on any good news event that the market is not expecting. In terms of a buying level, anything less than $43 has a low probability of being achieved, therefore the Buying level for Intel is a close by $44, as even though Intel is slowly dying it's far from being dead, in fact both Apple and AMD have been in far worse shape in the past than where Intel is today. Though I personally would not buy any more Intel stock until I see signs of life in this dying tech giant.
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My current analysis is focused on the prospects for the US and UK housing markets during 2021, soon to be followed by a stock market trend forecast for 2021.
In respect of which how did my forecast for 2020 fair?
31st Dec 2019 - Stock Market Trend Forecast Outlook for 2020
Dow Stock Market 2020 Outlook Forecast Conclusion
Therefore my forecast conclusion is for the Dow to target a trend to between 30,750 and 31,000 by the end of 2020. For a likely gain of 8% to 9% for the year (on the last close of 28,642).
My series of 2020 stock market analysis will seek to map out multi-month detailed trend forecasts as was the case for 2019. With the first to be completed during January, going into which my expectations are for a correction early 2020. Which given my bullish outlook implies should prove to be a buying opportunity.
Here is how the Dow trended during 2020 and where it ended the year.
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Nadeem Walayat
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Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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