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Will AMD's Vega Pose a Threat to NVIDIA's GPU Dominance?

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Advanced Micro Devices (AMD - Free Report) recently provided preliminary details about its most anticipated upcoming Graphic Processor Unit (GPU) architecture, Vega. The new GPU card will use second-generation High Bandwidth Memory (HBM 2), which means faster transferring of terabytes of data and much greater memory capacity.

Per AMD “Vega architecture is optimized for streaming very large datasets and can work with a variety of memory types with up to 512TB of virtual address space.” The capability arises from two new HBM 2-related features,  High Bandwidth Cache and High Bandwidth Cache Controller.

Although the details are vague, Vega’s incredible speed and sleeker memory allocation & usage capabilities will make AMD a potent force in the fast emerging of Artificial Intelligence (AI) market. Notably, NVIDIA (NVDA - Free Report) is the dominant player in this market due to its Pascal GPU architecture.

We believe that the improvement in clock rates and higher Inter Process Communication will ultimately boost Vega’s throughput that will help AMD to counter Pascal in the long haul. Moreover, Vega will allow AMD to solidify its position in the high-end gaming market, going ahead.

AMD expects to start shipping GPU products based on Vega architecture in the first half of 2017.
 

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AI Market: Strong Prospects for AMD & NVIDIA

AI market is anticipated to be worth $5.05 billion by 2020, per MarketsAndMarkets.com. AI techniques like machine learning, deep learning and natural language processing have gained immense traction over the last couple of years due to massive demand for analyzing unstructured data like tweets, social media posts, photos and videos.

GPUs that enable “parallel processing” have been the key driver behind AI’s emergence. The availability of powerful GPUs from NVIDIA and AMD made parallel processing much faster and cheaper.

AI techniques have been used by companies like Alphabet (GOOGL - Free Report) , Facebook, IBM and Microsoft to develop computer systems that can translate text into different languages and recognize objects in pictures. Adoption of AI-based chatbots for routine customer interaction and advertising increased significantly in 2016.

We also believe that AMD’s rumored licensing deal with Intel (INTC - Free Report) should help it gain more traction in the GPU space, and close the market share gap with NVIDIA.

Favorable Share Price Movement

We note that both AMD and NVIDIA have outperformed the Zacks Electronic semiconductors industry in the last one year. AMD and NVIDIA’s shares registered growth rates of 348.70% and 222.68%, respectively. In comparison, the industry gained 38.88%, over the same period.



Currently, AMD has a Zacks Rank #2 (Buy), while NVIDIA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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