Despite the ravages of the COVID-19 pandemic, the gaming industry has managed to hold on well and for gaming chip makers such as Advanced Micro Devices (NASDAQ:AMD) and Nvidia Corp (NASDAQ:NVDA).
AMD and Nvidia benefiting ahead of the launch of new gaming consoles
According to BofA Securities analyst Vivek Arya, the chip makers’ stocks have seen a positive movement over the pandemic period. The analyst maintains Buy ratings for the AMD and Nvidia stocks with a price target of $65 and $460 per share. The upbeat sentiment was motivated by a solid outlook in the gaming industry ahead of the launch of new generation gaming consoles. Sony Corp (NYSE:SNE) and Microsoft Corp (NASDAQ:MSFT) are expected to launch new gaming consoles before the end of the year.
According to Vivek, AMD has made significant headway in the markets despite around 76.8% of games using Intel Corp (NASDAQ:INTC) CPUs. The chipmaker made progress by increasing its market share by 170 basis points from the previous month to 23.2%. Since 2018 the company has improved its market share by 600-basis point with much of the growth coming from the Ryzen CPUs’ enhanced attractiveness.
Next-generation consoles to boost Navi GPU adoption
Vivek says that the recent Navi GPU family of AMD accounts for around 6% of its installed base, although it has seen faster adoption than the previous generation, Vega family. Around 52% of AMD gamers use the legacy GPUs, but that is expected to change once the company unveils “Big Navi” targeting high-end games in the second half of 2020. According to recent media reports, there will be a favorable entry-level price for the next generation consoles Xbox X and PS5. This is promising for AMD, considering its 100% share in-game console processors.
On the other hand, Nvidia only accounts for 9% of gamers owning GPUs that match the performance of Xbox X and PS5. Interestingly the next generation consoles are likely to trigger an upgrade cycle to the next generation 7nm ampere expected in mid-summer.