AMD is firing all cylinders against Intel again

Advanced micro devices (NASDAQ: AMD) didn’t have the best start of 2021 after that was reported Intel (NASDAQ: INTC) has begun to turn the tide in the CPU (central processing unit) market with a small market share gain in the fourth quarter of 2020. Chipzilla’s turnaround raised concerns about AMD’s ability to sustain its market share growth in 2021. especially after learning that Intel’s new CEO could adjust the chip giant’s strategy and expand the use of external foundries.

But the latest market share data from a credible source indicates that AMD continues to take stock away from its bigger rival.

Let’s take a look.

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AMD will eat Intel’s market share in 2021

AMD’s CPU market share rose 0.46 percentage points in March, and the company ended the month with 28.97% of the market under its control, according to the latest Steam Hardware survey. Intel controlled the rest of the market with a share of just over 71%.

It is interesting to note that AMD’s market share has increased in the first three months of 2021. Intel had reclaimed some of its smaller rival by December 2020, closing the year with 75% of the CPU market under its control. AMD has hit back and regained lost ground with three consecutive monthly stock gains.

Of course, investors should take the survey results with a pinch of salt as this is limited to Steam users only. But with Steam with 120 million monthly active users in 2020, the survey does provide some credible insights into the wider CPU market. So it can be said that Intel’s market share gains so far seem like a flash in the pan as AMD has regained its mojo again.

More profit is in the cards

Supply constraints had handicapped AMD in the fourth quarter of 2020, allowing Intel to capture some market share. But Chipzilla’s profits were reportedly at the lower end of the market, and the company also lowered the prices of its processors to boost shipments. The strategy weighed on Intel’s margins with a non-GAAP gross margin declining 1.7 percentage points in the fourth quarter.

The company is sticking to this strategy as it expects gross margin to decline by four percentage points in the first quarter as shipments from small core processors are expected to increase. AMD, on the other hand, is witnessing strong growth in the upper end of the processor market, with the delivery of 1 million units of the Ryzen 5000 processors in the last eight weeks of 2020, according to Mercury Research.

AMD is now looking for more fire in the higher end of the PC processor market. Supply chain sources indicate that AMD could increase production of Ryzen 5000 parts by 20% in the second quarter of 2021 compared to the first quarter. This could help AMD capture more market share as its high-end processors are said to be better than Intel’s competing offerings according to third-party benchmarks.

That’s not surprising given that AMD took Intel’s gaming CPU crown after the launch of the Ryzen 5000 series processors last year for its technological advantage. More importantly, AMD is unlikely to lose its advantage over Intel any time soon.

A combination of better availability and a superior product line will be the tailwind in AMD’s battle for more market share against Intel. This tailwind could help AMD take more of Chipzilla’s market share as the year goes on. So don’t be surprised to see AMD hit the ambitious guidelines it has set for itself this year and once again become a top tech stock after a lukewarm performance in the market in recent months.

This article represents the view of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We are variegated! Questioning an investment thesis – even one of ours – helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.