Nvidia Gains Are AMD’s Pains

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There are a number of similarities between Nvidia Corp. (NASDAQ: NVDA) and Advanced Micro Devices Inc. (NYSE: AMD). Neither is a significant player in the most rapidly expanding part of the chip business — mobile devices — while both provide graphics chips, arguably one of the slowest growing parts of the semiconductor business.

When Nvidia reported third-quarter results after markets closed Thursday evening, the company’s shares turned south in after-hours trading, but opened about 3% higher Friday. AMD opened about flat Friday, but the shares have dropped to about 1.6% below Thursday’s close.

Where AMD continues to eschew the mobile market, Nvidia is doing what it can to become a player there. It introduced a game controller, the Shield, in July and has recently launched a seven-inch tablet using its own Tegra 4 processor. But sales of the company’s Tegra mobile chips fell by 54% in the quarter.

It is almost as if the game controller and the tablet are demonstration devices for the versatility of the company’s chips. So far, though, the company has not found any takers. That should be no surprise because big mobile players like Apple Inc. (NASDAQ: AAPL) and Samsung Electronics use their own designs, and competitors like Qualcomm Inc. (NASDAQ: QCOM) and Texas Instruments Inc. (NASDAQ: TXN) are very tough to dislodge.

AMD’s success in landing a place with the new PlayStation 4 from Sony Corp. (NYSE: SNE) and the Xbox One from Microsoft Corp. (NASDAQ: MSFT) has already been accounted for in the stock price. The softness that Nvidia showed in graphics chip sales does not help AMD, nor does the overall decline in PC sales, which further erodes graphics chip sales. Nvidia’s soft forecast for the fourth quarter did not help AMD either.

While some analysts probably wish Nvidia would stop spending on Tegra and return the cash to investors, based on the change in Friday’s stock prices, it appears that investors think that Nvidia is on the right track and AMD is not.

Shares of Nvidia were up about 4.5% at $15.22 in mid-morning trading, in a 52-week range of $11.15 to $16.10. AMD shares were down 1.4% at $3.24, in a 52-week range of $1.81 to $4.65.