AMD's (NASDAQ:AMD) recovery isn't going to be easy, but as time passes, I am seeing a lot of really good things coming from this new management team. In particular, AMD's graphics division - which has seen significant market share losses to Nvidia (NASDAQ:NVDA) over the last year - has been limping along, providing fairly scant profitability compared to its larger graphics rival. Nvidia's "Kepler" architecture, which won back quite a bit of mind and market-share in the graphics segment, was well received, particularly in notebooks thanks to the company's "Optimus" technology that allowed for seamless switching between integrated graphics for 2D usage and the Nvidia graphics for 3D gaming.
That being said, I am noticing that AMD is becoming very aggressive with its game bundles on its graphics cards, and this is one of the reasons I own AMD - as a hedge against a very real potential for market share loss for Nvidia. Why is this important? Well, for one thing, there is not a particularly huge performance delta between Nvidia's latest and AMD's latest cards. While Nvidia's brand is generally stronger, and while on a performance/watt and performance/mm^2 (in games) Nvidia is typically regarded as the winner, these advantages are likely not as significant to hardcore gamers as the promise of multiple, hotly-anticipated games for free with their graphics card purchase.
On one hand, I am somewhat concerned that AMD is paying through the nose for these, but on the other, I am inclined to believe that the company is getting a pretty decent deal on the games, otherwise gross margins on the cards could be hurt significantly (and given the firm's promise of profitability by Q3, I would bet against that). I am convinced that this will help AMD win back market share in the high end of the graphics space, but I am just not sure how much it will win or what the impact on the bottom line will be as a result of this.
That being said, the word is out that EA's (NASDAQ:EA) hotly anticipated "Battlefield 4" will be included in the next bundle that AMD puts together, and I believe that such a hard-core and graphically taxing game being associated with AMD could help to not only build up AMD's brand image in this space, but also could help to accelerate any further market share gains in the high end.
Now, the big question mark here is why Nvidia is seemingly so "relaxed" about AMD's rejuvenated aggressiveness here. I know Nvidia is very Intel-like about its gross margin profile, but as a pretty big Nvidia bull, even I am concerned that the best that the company is doing is bundling $150 of in-game currency to be used to buy in-game items. Why isn't Nvidia more aggressively targeting developer support, especially in light of the recent console wins for AMD?
The discrete GPU market share numbers for Q1 should be very interesting, and if we see a strong uptick in GPU sales in AMD's Q1 report, then perhaps my thesis that Nvidia needs to be more aggressive to defend its turf will have some legs. On the other hand, I could be completely wrong about the potential impact of these game incentives on AMD's business, but as a gamer myself, I know that despite my preference for Nvidia cards, I would have to take a serious look at the AMD offerings if the company is throwing multiple high end games at me.
Disclosure: I am long AMD, NVDA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.