2018 was one of the most tumultuous years for crypto with all-time highs giving way to an over 80% decline.
Business Insider analyzed the divergence in share prices of the two chip manufacturers.
What Happened to the Chipmakers?
While AMD shares gained 71% during 2018, Nvidia shares lost 32% of their value.
According to Susquehanna International Group’s semiconductor analyst Christopher Rolland, this performance isn’t surprising.
He said that Nvidia is a pure GPU company while AMD sells both GPUs and CPUs.
To put it simply, CPUs have a broader customer base which acted as a safety net for AMD as GPU demand fell.
Nvidia could not capitalize on this benefit; hence their declining GPU sales were not obscured by a well-performing CPU business.
Was Overexcitement Behind the Crash?
Rolland also noted that 2017’s crypto boom led to an inventory problem for both the companies as they overproduced chips in anticipation of higher demand.
Soon after reaching all-time highs, the crypto market started to collapse, making mining less profitable.
Consequently, the demand for GPUs also fell and chipmakers were dealt a blow including both AMD and Nvidia.
The problem was more acute for Nvidia than AMD since GPU sales are its primary business.
Also, Nvidia has also alerted the market of their inventory issue leading to a fall in its share price.
Rolland suggests that one month’s difference between their financial reporting, with AMD reporting earlier than Nvidia, could be another reason behind the share price performance difference.
As Nvidia discloses later, they provided more information than AMD, again putting it in a disadvantageous position.
AMD, on the other hand, is taking Intel heads on, and Rolland believes that “the prospects for their CPU business versus Intel are the best that have been in decades.”
AMD shares had a decent run last year finishing up 71%.
AMD shares surged by 230% in mid-September, because Intel was facing production delays for its 10-nanometer chips.
This provided them enough traction to gain an advantage over their rival in the CPU market in the near and long-term.