In late January, this reporter had a chance to take a close look at the specs of the new Ryzen computer processor from Advanced Micro Devices, Inc. (NASDAQ:AMD), and hash out what it may mean for AMD stock.
The conclusion at the time was — and still is — the new CPU is everything Advanced Micro Devices touted it would be, and more. Not only does Intel Corporation (NASDAQ:INTC) have good reason to be worried, AMD shareholders have good reason to be optimistic. Although AMD stock is still overbought and ripe for a short-term pullback, any dip would be a buying opportunity in light of the potential of the Ryzen processor.
But the new CPU isn’t the only game-changing technology Advanced Micro Devices has been working on for the past couple of years. Its new graphic processor unit (GPU) architecture, called Vega, could give AMD a weapon that lets it take dead aim a video-oriented rival Nvidia Corporation (NASDAQ:NVDA).
Just as a refresher, the new CPU from AMD that is supposed to launch sometime this quarter will give rival Intel a run for its money. The most comparable Intel CPU, the i7-6900K, runs at 3.2 GHz but can cranked up to a pace of 4 GHz. The Ryzen’s base operating rate is 3.4 GHz. Though the top-end speed isn’t clear yet, it shouldn’t be too different than the i7’s.
Where the new processor is apt to really turns heads, however, is on price. The industry’s handicappers are looking for the “Zen” to retail for between $500 to $600 apiece, or roughly half the $1,000-plus sticker one would find on the package of the i7-6900.
A new CPU wasn’t the only thing Advanced Micro Devices has been working on the past couple of years, though. The Vega graphic processor unit has been under development too, and is about to be unleashed on a market eager to try it out.
A GPU is the portion of the computer that handles the display/interface a user sees. Most desktops have a separate chip (with its own memory) attached to the motherboard to make this happen, whereas most laptops integrate this function into the motherboard itself.
The Vega platform employs a whole new kind of thinking about the way a machine handles all the video-based demands put on it. Its second-generation high bandwidth memory (or HBM2) is a stacked memory architecture that performs significantly better than the more common GDDR5 (double data rate type-five) utilized by most graphics processing units today. This arrangement allows for a so-called High Bandwidth Cache and High Bandwidth Controller, which effectively offloads the memory work usually performed by a graphics card to that computer’s — the motherboard’s — memory. This means a practically infinite amount of memory can be dedicated to handling the display. The maximum virtualization is capped at a ridiculous 512 terabytes.
In layman’s terms, this approach is about twice as powerful as most current alternatives. Perhaps more important, Vega will make Advanced Micro Devices competitive with the newest-generation of GPU architecture from Nvidia, called Pascal.
That likely has been the goal all along.
Expect Big Things
It’s not just great right hardware/software that should have AMD stock holders piqued at this point. There’s a sizable market here, and Advanced Micro Devices is well-positioned to garner a piece of it.
An estimated 67.6 million GPUs are expected to be sold between 2016 and 2020. Another report suggests the size of the market, by revenue, will reach $157.1 billion by 2022.
Both forecasts should be taken with a grain of salt. It’s not clear if either accounted for the power/marketability of Pascal or Vega, nor is it clear if the outlooks recognized that PC gaming was making a comeback now that virtual reality is a … reality. Still, the scope of the graphic processing market outlooks make it clear there’s a lot of money on the table.
It’s also worth noting — especially to current owners of AMD stock — that Advanced Micro Devices doesn’t control the bulk of it. Experts believe AMD only controls about 30% of the GPU market, with the rest mostly dominated by Nvidia. Interestingly though, even before Vega has launched and even after Pascal hit the market, AMD was clawing back market share at least through the third quarter of last year.
If AMD can do that with its lesser Polaris graphics platform going up against Pascal, one wonders what kind of dent Vega may be able to make.
Bottom Line for AMD Stock
As was noted with last month’s look at Ryzen, AMD stock is still overextended an ripe for a wave of profit-taking. Any dip is not a reflection of the company’s prospects, however. It’s simply the result of an overzealous 300% advance over the course of 2016 that invites short-term selling.
Don’t sweat it. As was also noted a month ago, Advanced Micro Devices has more going for it in 2017 than it has had going for it in years.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.