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Why has nVidia been more attractive to Wall Street than AMD?

There’s nothing KitGuru enjoys more on a Sunday morning than analysing tech specs and financial data. With the posting of nVidia’s latest results for its 3rd quarter, we were in the mood to see how the global land lies. KitGuru has been plotting (financials) and we’re puzzled.

AMD VPs hate the fact that, despite their best efforts, nVidia seems to remain the darling of the stock exchange. While AMD (like ATI before it) plots a slow and steady path to growth, there’s little dynamism. Stock exchanges around the world don’t get excited by the slow and steady. They love nothing better than a good roller coaster, where significant money can be made on both the up and down slopes.

Historically, you’d invest in AMD stock when you wanted to be sure of being able to afford a retirement which gives you a beach holiday each year and a steady supply of Werther’s Originals. On the other hand, nVidia investors have had quite a few opportunities to buy pools and sports cars. Likewise, they’ve also had opportunities to lose the shirts off their backs. Either way, nVidia has had an ability to consistently excite Wall Street.

With the reporting of nVidia’s Q3 results, and its comment that Q4 should be in the 3-5% higher range, we decided to map the past 10 years to see what the situation looked like. The left hand axis is reported revenue in billions of dollars, taken from the company’s filed reports.

Overall, very impressive results. The only thing that will be concerning nVidia is that while the PC market continues to grow, its own results have flattened off. GeForce is not enough. New products are needed.

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OK. That’s nVidia.

What about AMD?

Well, for a start, there seems to be a slight naming difference between the two. If AMD starts the year in 2010, then that is the 2010 number, whereas nVidia labels the results by the year in which they are reported. For the purposes of these graphics, the year means ‘year in which the data will be posted’. Also, we’ve extrapolated the final AMD number from the 3 quarters already posted with a modest 3% increase for the busy Q4 period (up on  Q3).  Ignore for a second the fact that AMD’s numbers are almost double nVidia’s, focus instead on the peaks and troughs.

AMD Financials have been so flat for so long that they might have been modelled on Holland. Until this year.

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nVidia’s meteoric growth through to 2008 was fantastic news for investors. However, 3 flat years on the trot have taken some of the shine off. Jen Hsun’s resurgence has been pinned to the back of the Fermi series of graphics processors. Unfortunately, the GPU market is not growing enough for everyone to carry on eating more. AMD’s hopes are pinned to the much more mundane Fusion processor, which combines CPU with GPU. The integrated market shows no sign of slowing down.

With all that going on, AMD is still not as attractive as it could be to investors.

We’ll leave you with one final chart. When you consider that AMD is the only compant with a CPU, GPU and Chipset offering, as well as being a key player in the console market with Wii and XBox 360, this is the chart that started our questioning this morning.

AMD's revenues are almost double nVidia's, but still the share price is lower. Much, much lower.

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Right now, with AMD, we’re seeing a much stronger company than it was 2 years ago. Until it began a programme of serious change at the top of the organisation, its share price had remained consistently anemic for a long time. Around January 2009, we begin to see the impact that these changes have had.

This year has seen AMD revenue leap up, almost exclusively off the back of its graphics products. If the CPU and chipset teams can begin to lead in some of their respective markets, then maybe AMD could change its Wall Street profile.

For now, we have a company with 2x nVidia’s revenue and a fraction of its share value. Will 20011/12 prove different?

We’ll return to this analysis once AMD’s year end has been announced.

KitGuru says: Fusion should provide a breakthrough. AMD has done all it can with graphics, to take the company forward and begin challenging for a position on the Fortune 500, it needs to be a rounded performer. nVidia’s situation is clear, it simply needs to diversify.

Comment below, or let us know what you really think in the KitGuru forum.

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