There's this prevailing view that Intel (INTC) and Advanced Micro Devices (AMD) split the CPU market. Accordingly, the market tends to use market share changes and stock price changes interchangeably. For example, on the day when Intel’s Q2 earnings report revealed that its 10nm chip production process will arrive in 2H19, a year later than initially planned, Intel shares were down 7% and AMD was up +7.6%. Similarly, Susquehanna’s Christopher Rolland said that AMD is picking up market share in desktops and laptops with Ryzen Mobile showing “signs of life.” AMD shares were up 6.5% and Intel shares were down 3%. On the other hand, amid BlueFin Research Partners’ comment that Intel’s 10nm production ramp could begin as early as April, up to six months earlier than current estimates, Intel shares closed up 3.6% while AMD closed down 7.6%. The equivalence between market share changes and stock movements rests on the premise that Intel and AMD are in a market with a fixed size to fight or share among each other. One’s gain is the other’s loss, or a “zero-sum" gain. However, a zero-sum gain in market share is not automatically equivalent to a zero-sum gain in stock prices. When the CPU market grows over time, every participant will benefit from the industry growth, albeit at a different magnitude. Therefore, in this post, I investigated how AMD’s market share change will affect AMD stock prices.
For some unknown reasons, AMD has been nervously vague about the way they classify their segment revenues. On that issue, SA commentator, Grxbstrd, has the following to say,