Morningstar

AMD: The Intel-Nvidia Collaboration Is Worth Watching but Not a Death Blow

The deal doesn’t alter our thesis that AMD will carve out a piece of the AI pie over time.

The AMD Logo photographed off the screen of an iphone.
STRF/STAR MAX/IPx via AP
Securities in This Article
Advanced Micro Devices Inc
(AMD)
NVIDIA Corp
(NVDA)
Intel Corp
(INTC)

Key Morningstar Metrics for Advanced Micro Devices

Advanced Micro Devices’ AMD rivals Intel INTC and Nvidia NVDA announced a collaboration to jointly develop multiple generations of custom data center and PC products. Nvidia will also invest $5 billion in Intel’s common stock at a price of $23.28 per share.

Why it matters: We view the deal as a modest negative for AMD, as it may lead to more competitive x86 CPUs for Intel, which might stop the bleeding in its recent market share losses to AMD.

  • However, AMD’s share gains over Intel in recent quarters in x86 CPUs have been substantial, and we still think it’s uncertain whether Intel can halt these losses in the near or even medium term.
  • Perhaps a positive for AMD is that Nvidia’s investment might make it cozier with the US government (which owns 9.9% of Intel), which might allow Nvidia (and AMD) to sell more advanced artificial intelligence products into China.

The bottom line: We maintain our $155 per share fair value estimate and Very High Uncertainty Rating for narrow-moat AMD. Shares have retreated from the $175 range a month ago and now appear fairly valued.

  • The deal doesn’t alter our thesis that AMD will carve out a piece of the AI pie over time while gaining share over Intel in x86 CPUs in the PC and data center.

Big picture: Nvidia has long paired x86 CPUs from Intel, such as Sapphire Rapids, within its GPU servers. The collaboration extends this relationship with NVLink connectivity. We haven’t expected AMD to gain share here, since AMD offers competing AI products.

  • For those workloads where customers seek strong performance and/or buy x86 CPUs independent of GPUs, we believe AMD has leapfrogged Intel as the server CPUs of choice, given the former’s share gains in recent years.
  • We’re modestly more concerned about Nvidia’s deal to supply RTX GPU chiplets into Intel’s x86 PC CPU products. It’s possible that improved graphics performance, if not the Nvidia brand, may edge PC makers back toward Intel instead of AMD.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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