Nearly 2 years ago, I wrote a bear case for AMD. Let’s review.

Original post: https://www.reddit.com/r/AMD_Stock/comments/kg4e8j/is_amd_the_king_of_the_titanic_x86/

The basic premise was that the computing industry as a whole is moving away from a duopoly (often monopoly) of Intel and AMD. x86 chips (which is what AMD and Intel make) are being replaced at a rapid rate on servers, and Apple Silicon jump-started the switch at the laptop and desktop level.

AMD was fortunate enough to catch Intel's pants down and it was fortunate enough to be making GPUs during the crypto boom.

But when the dust settles, AMD's future looks bleak.

Let's review some of my predictions below.

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Most people here focus on AMD vs Intel or AMD vs Nvidia like it's still 2010.

In 2021, it's AMD vs Intel, Nvidia, ARM, Apple, Microsoft, Qualcomm, Google, Baidu, Tencent, Ampere, Nuvia.

It's tough to see an exponential trend when you're at the beginning. This post spells out the trends for all AMD markets.

ARM Attack on consumer x86 market:

• x86 market shrank by 10% the moment Apple announced a full transition to ARM True. Apple Silicon is both faster, and far more efficient than AMD's very best chips today. Apple's Macs are growing extremely fast as a result.
• Even worse, Apple is the forcing function for PC software makers to support ARM, paving the way for Windows ARM True. A ton of software makers have developed ARM versions in the last 2 years.
• Microsoft has just announced x86 emulation on their Windows ARM OS Windows 11 ARM can now emulate x86 apps. Paving the way for ARM CPU makers on Windows.
• Apple's entry-level M1 is faster than 4900HS by 55% in single-core and 3.7% in multi-core while using 5x less power. You can buy an M1 laptop today while the 4900HS is a highly binned-part.
• Apple's entry-level iGPU blows away the very best AMD iGPU
• Apple's ARM chip allows the entry-level Macbook Pro to have 20 hours of battery life while staying extremely cool
• Apple is readying 8,16, 32 core SoCs. For reference, M1 has only 4-high performance cores.
• Apple is poised to significantly increase PC market-share, 100% within 3 years. On pace.
• In order to compete, PC makers like Dell, Lenovo, and HP will increasingly look to ARM alternatives
• Microsoft is working on in-house ARM chips for Surface Yes. They hired Apple ARM architect. They're planning ARM chips for Azure as well.
• Qualcomm is expected to become a serious player in the laptop space Yes. They bought Nuvia for $1.4 billion to focus on laptops (as the first market).

ARM Attack on hyperscalers market:

• AWS's Graviton2 workload increased by 10x last year. In just one year, Graviton2 is now 10% of all AWS CPU workloads. In 2020, Graviton2 accounted for 50% of all new EC2 instances. It's likely much more in 2022. Amazon just announced Graviton3.
• Like Apple in consumer market, Amazon is the forcing function for better ARM server software support Yes. Almost all popular server software now have ARM versions.
• Amazon will most certainly prioritize in-house designs over x86 chips. In the future, Amazon will likely offer x86 only for legacy software. Looking like it. Look up Graviton3. Amazon is all in.
• AWS controls 40% of the cloud. If AWS moves most of its future workload to its own CPUs, then AMD can control at best 60% of what Intel used to contol.
• In house ARM chips allow hyperscalers to differentiate, save on cost, and build chips tailored to their unique challenges
• Microsoft is designing its own ARM cloud chips Yes
• You can expect Google, Baidu, Tencent to follow soon Yes. Alibaba, Tencent both launched custom ARM chips for their clouds. Baidu will soon as well. Google has signaled that they will be developing custom ARM chips for their cloud.
• Hyperscalers don't want to be controlled by a duopoly. If Intel isn't grabbing them by the balls, then it's just AMD. It's the same thing. Hyperscalers want to control their own destiny and ARM allows them to.

ARM Attack on small size cloud companies:

• Ampere will allow smaller cloud companies to buy into ARM If Ampere was a public company, I'd be buying a lot.
• Anandtech just said that Ampere's latest 80-core chip is 42% better than Epyc in terms of cost/performance
• Ampere is releasing a 128-core chip in 2021
• Anandtech says Ampere's 2022 N1 Neoverse chip could be 50% faster at minimum
• Very well-funded startup Nuvia is also competing here

GPUs:

• Apple will no longer use AMD GPUs in their computers. Bloomberg reports that Apple is testing 64-core and 128-core GPUs. For reference, M1 has 8 GPU cores.
• Nvidia's grip on server GPUs and AI is tight and AMD has a mountain to climb in order to catchup
• With ARM, Nvidia can now offer complete server units from CPU to GPU to interconnects, just like AMD
• Intel is joining the cloud GPU competition, and they're expected to use TSMC to manufacture Xe GPUs.

Consoles:

• Mobile gaming is now 3x bigger than consoles
• Consoles are a low-margin business
• It's quite possible that PS5/Xbox Series X are the last consoles ever if AAA gaming moves to the cloud in the next 6-7 years

TSMC:

• As more companies move to in-house designs, competition for TSMC wafers are expected to increase significantly
• Apple is likely to continue to hold a node advantage lead because they have a lot more cash and a lot more volume. Apple's volume will likely increase significantly with Apple Silicon Macs. Ming-Chi Kuo expects Apple to sell 35 million Macs/year by 2023.
• Unlike Intel, AMD does not have a node advantage over Qualcomm, Ampere, Nuvia, Nvidia, Amazon, Microsoft, etc.
• Intel is expected to make a decision on whether they will invest in their 7nm process node in Spring of 2021 or use TSMC. If Intel decides to go fabless instead, AMD will lose its node advantage over Intel and wafer prices will increase for everyone. Intel will use TSMC 3nm.

If you're buying into AMD long-term, you have to believe that:

• AMD will become a monopoly in the x86 market in record time
• Intel will not switch to TSMC and does not fix its node issues. Basically, you expect Intel to do nothing. Intel's Alder Lake is a huge return to the performance crown.
• AMD can make enough progress in Zen to delay the inevitable full ARM dominance
• AMD is working on ARM chips now, or will buy Ampere/Nuvia to enter the ARM race
• Wall Street will respond well if AMD decides to go ARM and bet against their own cash cow: Epyc
• AMD can eventually compete with Nvidia in GPUs/AI
• AMD takes a big piece of the cloud gaming pie
• Consoles will have another generation after PS5/Xbox
• Microsoft, Google, Baidu, Tencent, Qualcomm, Nuvia, Nvidia, Intel fail to compete with Zen and Radeon

My personal recommendation:

• You can own AMD
• You're crazy if you're still all-in on AMD
• You should diversify your portfolio with TSMC, Apple, Amazon, Microsoft, Nvidia This suggestion proved to be wise. AMD is getting downgraded while Apple, Microsoft, and Nvidia continue to soar. Amazon is doing well. TSMC is ok.