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Many things are progressing positively for Advanced Micro Devices (AMD 2.55%) at this moment. The firm is capturing a greater share of the PC CPU sector, its server CPUs are performing well, and its AI accelerators have swiftly evolved into a multibillion-dollar enterprise.
However, the gaming sector presents a different scenario. AMD’s gaming revenue plummeted by 69% year-on-year in the third quarter of 2024, resulting in only $462 million. In contrast, the data center division generated $3.5 billion in revenue during the same quarter.
Two main challenges are influencing this situation. Firstly, AMD provides semi-custom chips for prominent gaming consoles. The existing generation of consoles is now in the latter stages of their life cycles, which explains the decline in demand.
This revenue source should recover in the next few years, contingent on when Sony and Microsoft release their new consoles. The upcoming generation will likely be powered by AMD chips.
Secondly, AMD remains in a distant second position in the gaming GPU sector, trailing behind Nvidia. Although AMD does not disclose specific gaming GPU revenues, the company mentioned during its earnings call that gaming GPU sales decreased year over year in the third quarter. The company partially attributed this decline to the imminent launch of its next-generation graphics cards, despite Nvidia successfully increasing gaming revenue in its latest quarter while also preparing new offerings.
The situation might worsen this year
AMD’s forthcoming Radeon RX 9000 series graphics cards may provide a boost to gaming revenue upon their launch in the first quarter; however, they will compete against Nvidia’s brand-new RTX 50 series graphics cards. Nvidia’s latest offerings feature advanced AI-powered technology, suggesting limited potential for AMD to improve its competitive stance in the premium segments that Nvidia typically dominates.
Historically, AMD has been far more competitive in the lower-end segment, where prices remain under $300. The RX 7600 card is the latest budget option from AMD, although earlier generation cards such as the RX 6600 are still widely available. Nvidia has largely overlooked this segment – even the four-year-old RTX 3060 is still priced around $300.
As AMD contends with Nvidia in the premium market, a surprising resurgence from Intel (INTC 9.25%) will create fierce competition in the budget category. Intel entered the graphics card arena in late 2022 with its Arc Alchemist cards, yet encountered software issues that hampered progress. Nonetheless, the company persevered, and its subsequent Battlemage cards are significantly stronger.
Intel’s B580 was dubbed “the new $249 GPU champion” by reviewers from Tom’s Hardware. The company has markedly enhanced its software drivers and achieved sufficient performance gains to make its new midrange graphics card a highly appealing choice for budget-conscious gamers. The B580 outperforms AMD’s similarly priced RX 7600 and even surpasses the more expensive RX 7600 XT on average.
Intel also provides the $219 B570, which reviewers from Ars Technica referred to as “the cheapest good graphics card.” Intel has incorporated enough performance at a low price to render the B570 an attractive choice for the most budget-aware PC gamers.
This is the landscape AMD finds itself navigating as it gears up to launch its new RX 9000 graphics cards. The company will likely initiate with higher-end offerings and gradually expand its lineup over time, allowing Intel several months as the uncontested budget gaming leader. Although Intel captured minimal market share last time, its Battlemage graphics cards are set to be significant contenders. Reports indicate they’ve been selling out everywhere, and prices are elevated due to strong demand.
A minor obstacle
AMD is far more diversified today compared to just a few years ago. While the gaming sector remains vital, the company’s PC CPU, server CPU, and AI accelerator divisions are increasingly capable of driving growth even if gaming sales remain sluggish.
Nonetheless, gaming could continue to negatively impact the company’s performance this year, even with the impending RX 9000 launch. With Nvidia dominant in the premium end and Intel attempting to capture the budget segment, AMD could witness further contraction of its graphics market share in 2025.
Timothy Green holds positions in Intel. The Motley Fool has positions in and endorses Advanced Micro Devices, Intel, Microsoft, and Nvidia. The Motley Fool endorses the following strategies: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool maintains a disclosure policy.
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