Why AMD’s graphics solutions segment offers some good news

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Growth in graphics segment offsets decline in PC segment

Thanks to console design wins and differentiated GPU (graphics processing unit) technology, AMD’s (AMD) graphics segment has experienced growth. As mentioned in the earlier part of the series, the company’s computing segment seems to have stagnated. As the below chart shows, PC sales have declined by ~0.5% in 3Q14, as reported by Gartner. To reduce its dependence on the computing segment, the company revised its strategy, which appears to be paying off. AMD did manage to report growth in its graphics and visual solutions.

If AMD continues to post disappointing results, it will impact exchange-traded funds (or ETFs) like the First Trust Technology AlphaDEX Fund (FXL) and the iShares PHLX Semiconductor ETF (SOXX) that have significant exposure to AMD.

According to Jon Peddie, the research computer graphics market will be worth more than $149 billion by 2017, growing at a CAGR of 5.5%. The graphics segment of AMD is strong and will assist in its revenue growth in the near future.

New product launch by Nvidia continues to exert pressure on AMD

In September 2014, Nvidia (NVDA) launched Maxwell-based GTX 980, a computing and graphics card. At 1.6 million samples/sec, GTX 980 Ti is 15% faster than AMD’s R9 290X and 54% faster than GTX 780 Ti. Success of GTX 980 will likely put an even greater pressure on AMD’s ailing computing segment.

AMD’s new graphic product launches

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AMD released R9 295 X2, a graphic card aimed at 4k PC game enthusiasts, and R9 285 for enthusiast gamers. According to the company, R9 295 X2 is the world’s fastest graphics card to date. According to Forbes contributor Jason Evangelho, “The Radeon 295 X2 is a fantastic graphics card capable of outperforming two Nvidia GTX 780 Tis (about $1400), and in almost all situations outperforming Nvidia’s $3000 Titan-Z by 10% or more.”

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