Nvidia, AMD Benefit From New Products, Strong Gaming Cycle: BofA

NVIDIA Corporation NVDA and Advanced Micro Devices, Inc. AMD continue to be bullish GPU plays despite changing market trends, according to a BofA Securities analyst. 

The Semiconductor Analyst: Vivek Arya reiterated Buy ratings on AMD and Nvidia shares. The analyst has a $135 price target for AMD and $260 price target for Nvidia.

The Semiconductor Takeaways: The average selling prices that drove GPUs in 2021 will likely moderate in 2022, Arya said in a note.

The gaming environment remained robust in the second quarter, with discrete GPU sales rising 100% year-over-year and 14% quarter-over-quarter to $3.45 billion, the analyst said.

The bulk of the year-over-year growth was driven by ASPs, as capacity constraints led vendors to prioritize higher-end/higher ASP products, he said. 

The cumulative Ampere/Turing mix of Nvidia gamers grew 250 basis points month-over-month and 1,800 basis points year-over-year in August, with average ASPs 20%-100% above older-gen Pascal, Arya said, citing BofA's Steam Survey tracker.

A similar dynamic is likely to be seen for full year 2021 as constraints persist throughout the rest of the year, the analyst said. Total discreet GPUs sales climbed 62%, mainly driven by ASPs, even as units grew just 7%, he said.

This dynamic, the analyst said, will likely reverse in 2022 as capacity comes online and mix normalizes.

Arya estimates 5% growth in the discreet GPU market, driven by units, while ASPs will likely fall 3%-5%.

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Nvidia, the gaming leader with a unique accelerated computing franchise, and AMD, with a strong roadmap for CPU share gains, are benefiting from new products and strong gaming cycle, according to BofA. 

Nvidia's Ampere penetration of 7.1% is below Turing and Pascal at equivalent points in their ramps, likely due to supply challenges, Arya said.

"Importantly Ampere avg. ASPs of $523 are still 15- 65% above Turing/Pascal at equal points in their ramps, which should help support our long-term expectation for ~10% ASP appreciation as NVDA gamers mix up the stack," the analyst said.

Ampere adoption is likely to accelerate as more capacity comes online, likely in mid-to-late 2022, he said. 

Intel Corporation INTC's CPU share among PC gamers increased 180 basis points month-over-month in August to 72.6%, Arya said. On a year-over-year basis, AMD's share was up 250 basis points, the analyst said. 

AMD's overall PC + Server CPU share can grow 300-400 basis points annually through at least 2023, according of BofA.

AMD, NVDA, INTC Price Action: At last check, AMD shares were down 2.48% to $106.44 and Nvidia was slipping 1.42% to $223.40. 

Intel shares were retreating 0.51% to $53.38. 

Photo: courtesy of Nvidia.