Nvidia's market cap has surged past $1.1 trillion, more than twice that of its closest competitor.
Nvidia serves the AI, HPC, and gaming markets, with gaming representing a $100 billion opportunity.
Nvidia's stronghold in PC gaming challenges AMD's console dominance, yet both coexist in a dynamic market.
When it comes to market capitalization, Nvidia has solidified its position as the largest semiconductor company globally — by far. Its market cap has surged past $1.1 trillion, which is slightly more than double that of the second-place holder, TSMC. Nvidia's market cap is also roughly four times more than that of its primary rival, Advanced Micro Devices (AMD).
Undoubtedly, Nvidia's leadership in the development of artificial intelligence (AI) and high-performance computing (HPC) led the company to reach this milestone.
However, AI and HPC aren't the only niches where Nvidia has a competitive edge. The company also dominates a portion of the gaming sector, although here it faces direct competition from AMD.
Nvidia and the Gaming Market
As highlighted by a presentation by Nvidia, of the company's $1 trillion long-term market opportunity, gaming is the smallest portion but still represents $100 billion.
In recent quarters, Nvidia's gaming segment has declined in relevance, compared to its other segments. In the fourth quarter of fiscal year 2022, gaming accounted for about 44% of the company's revenue. However, in the fourth quarter of Nvidia's fiscal 2024 (the most recent quarter), gaming made up only 15% of the company's net revenue. This is due largely to the substantial increase in revenue from data centers.
These factors have certainly fueled Nvidia's remarkable stock performance and profitability. Some years ago, the landscape for substantial data center growth, driven by high demand in HPC and AI, was less defined. At that time, gaming and professional visualization held more strategic importance for the company compared to the present.
When compared to its competitors, Nvidia stands out in this sector, particularly in the realm of PC gaming, where its graphics processing units (GPUs) set the benchmark despite facing competition from AMD.
AMD As a Competitor for Nvidia
Given AMD's lack of a colossal data center revenue stream, its gaming segment remains highly relevant, accounting for approximately 26% of the company's revenue.
Like Nvidia, AMD positions itself as a leader in the gaming market. However, the key difference lies in AMD's presence not only in the GPU market for PC gaming but also in producing central processing units (CPUs) and customized chips for consoles like the Xbox Series X and S, PlayStation 5, and the Steam Deck.
AMD holds the leading market share for the console segment, bolstered by partnerships with dominant players like Sony, Valve, and Microsoft, which presents a competitive advantage. Considering just the custom silicon part, the company eyes a total addressable market (TAM) of $30 billion, encompassing not only gaming (AR, VR, and cloud gaming) but also other segments like data center and automotive.
Analyzing the overall GPU market (considering iGPU), AMD is starting to gain relevance, posing a slight challenge to Nvidia and Intel.
On the other hand, Nvidia lacks dominance in this area because the company doesn't produce iGPUs, focusing solely on dGPUs, where it holds an 87% market share.
The Verdict
Considering the information above, although often overlooked in analysis, the gaming segment holds significance for both Nvidia and AMD, representing a vast and promising market.
Regarding competition, AMD does shine in some niches, such as consoles, which could yield future benefits. However, in the segment where Nvidia aims to be relevant (PC gaming), the chipmaker is dominant. It seems quite challenging for AMD to catch up, at least for now.
Nonetheless, in the long run, there's likely room for both companies to operate and compete within this market.