Many are going straight Advanced Micro Devices (AMD 2.55%) right now The company has gained market share in PC CPUs, its server CPUs have sold well, and its AI accelerators have quickly turned into a multibillion-dollar business.
The gaming business is another story. AMD’s gaming revenue fell 69% year over year in the third quarter of 2024 to just $462 million. By comparison, the data center segment produced $3.5 billion in revenue during the same quarter.
There are two issues at play. First, AMD supplies semi-custom chips for major gaming consoles. The current generation of game consoles are now in the latter part of their life cycles, so it makes sense that demand is falling.
This source of income should be restored sometime in the next few years, depending on the timing Sony AND Microsoft release new consoles. Next-gen consoles are likely to be powered by AMD chips.
Second, AMD remains a distant second to Nvidia in the gaming GPU market. While AMD doesn’t break out gaming GPU revenue, the company revealed in its earnings call that gaming GPU sales were down year-over-year in the third quarter. The company partly blamed the upcoming launch of its next-generation graphics cards as the reason for the decline, but Nvidia managed to grow gaming revenue in the latest quarter despite preparing new products.
The situation may worsen this year
AMD’s new Radeon RX 9000 series graphics cards could help boost gaming revenue when they launch sometime in the first quarter, but the company will be up against the all-new RTX 50 series graphics cards from Nvidia. Nvidia’s new cards bring some great AI-powered technology, and there’s little reason to believe that AMD’s competitive position will improve significantly in the more expensive parts of the market that Nvidia tends to dominate.
AMD has historically been much more competitive at the lower end of the market, where prices stay below $300. AMD’s RX 7600 card is the company’s latest budget option, although older-generation graphics cards like the RX 6600 remain widely available. Nvidia has largely ignored this part of the market – even the four-year-old RTX 3060 still sells for around $300.
As AMD battles Nvidia at the high end of the market, a surprising comeback from Intel (INTC 9.25%) will provide stiff competition at the low end. Intel entered the graphics card market in late 2022 with its Arc Alchemist cards, but software issues derailed the effort. The company did not give up and its second generation Battlemage cards are much more powerful.
The Intel B580 was called “the new $249 GPU champion” by reviewers at Tom’s Equipment. The company has greatly improved its software drivers and brought enough performance gains to the table to make its new mid-range graphics card a very attractive option for gamers on a budget. The B580 wipes the floor with AMD’s similarly priced RX 7600 and even outperforms the more expensive RX 7600 XT on average.
Intel also offers the $219 B570, which reviewers at Ars Technica called “the cheapest good graphics card.” Intel has enough performance at a low enough price to make the B570 a compelling option for more PC-conscious gamers.
That’s the environment AMD finds itself in as it prepares to launch its new RX 9000 graphics cards. The company will likely start with higher-end cards and then fill out its lineup over time, giving Intel for months as the undisputed king of budget games. While Intel gained a bit of market share last time, its Battlemage graphics cards are poised to be big winners. They are said to be selling out everywhere and prices have risen due to high demand.
A slight headwind
AMD is much more diverse today than it was even a few years ago. The gaming business is still important, but the PC CPU, server CPU and AI accelerator businesses are capable of driving growth even if gaming sales continue to lag.
However, gaming may continue to drag down the company’s results this year, even with the release of the RX 9000. With Nvidia dominating the high-end and Intel playing for the low-end, AMD could see its graphics market contract further in 2025.
Timothy Green has positions in Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
