Advanced Micro Devices (NASDAQ:AMD) has notched another win: Microsoft (NASDAQ:MSFT) recently announced that its next-generation Xbox gaming console -- due to hit the market late next year -- will be powered by AMDs semi-custom chips. That decision effectively ends NVIDIAs (NASDAQ:NVDA) chances of benefiting from the rising popularity of gaming consoles.
This doesnt come as a surprise. There were rumors that Microsoft was on course to once again choose AMD chips for the Xbox. Sony, meanwhile, had already confirmed that it will be using an eight-core AMD chip based on a 7-nanometer manufacturing process, as well as the companys Navi-based graphics processor, in the next PlayStation.
These two wins will give AMD a nice shot in the arm in the long run, and put it in a great position to take advantage of a shift in gaming hardware preferences -- something NVIDIA now risks missing out on.
Image Source: AMDA temporary demand surge dissipates NVIDIA and AMD have made a ton of money for themselves and for investors by selling graphics cards to gamers.
But the graphics processing unit (GPU) market isnt as profitable as it once was.The last major catalyst for GPU sales was cryptocurrency mining. GPUs are built to perform specific types of repetitive tasks like rendering video at a much faster rate than more-flexible CPUs (central processing units), which makes them ideal for mining digital currencies such as bitcoin.
Miners intent on reaping the benefits of rising cryptocurrency prices sent the GPU market into short supply. But once the crypto bubble burst, GPU prices came crashing down as demand slumped.This has hurt the financials of both NVIDIA and AMD in recent quarters, though the latter has fared better thanks to a diversified business that includes CPUs.
Looking ahead, it appears probable that the GPU market might not recover, due to the shift in gamers hardware preferences.All hands in the cookie jarJon Peddie Research estimates that 20 million PC gamers could switch to gaming consoles in the next few years. That shift seems to be underway already: Sales of console games increased 15.
2% last year, significantly ahead of the 3.2% growth in PC games, as per Newzoos estimates.Sonys PlayStation 4 has sold over 90 million units in its lifetime, while Microsoft has moved more than 40 million Xbox Ones, according to various estimates. Both consoles were launched in November 2013, indicating an annual combined sales rate in the neighborhood of 25 million units.
Of course, the PC market is much bigger: Its annual shipments came in at nearly 260 million units last year. But dont forget that PC sales have been declining for seven years straight now. However, gaming PCs reportedly accounted for just 19% of total PC sales in the first 10 months of 2018, according to German market research firm GfK.
. But those sales figures would have been inflated by the higher GPU prices that resulted from the crypto-driven shortage.In 2016 (back before GPU prices were inflated.....