Steam Data Suggests Nvidia, AMD On Track For Big Q4

Advanced Micro Devices, Inc. AMD and NVIDIA Corporation NVDA have been two of the hottest stocks of 2020, and the latest Steam data from Bank of America suggests the companies could both be on track for big fourth quarters.

On Monday, Bank of America analyst Vivek Arya said his monthly survey of Steam GPU data indicates the launch of new gaming consoles from Microsoft Corporation MSFT and Sony Corp SNE are driving a GPU upgrade cycle.

“With only 10% of NVDA gamers owning a GPU offering similar performance to the PS5/Xbox X (up 59bps MoM), we expect higher standards to increase NVDA ASPs (Ampere $699/$499 price vs. NVDA avg. user in the $200-$300 range),” Arya said.

At the same time, rising cryptocurrency prices have also led to a resurgence in crypto mining demand.

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The Numbers: Nvidia’s share of Steam gamers dropped by 0.43% month-over-month in November but remains strong at 73.9%. Adoption of its next-generation 7-nanometer Ampere processor will be key to its near-term success.

AMD continued to gain CPU market share from Intel Corporation INTC in November. While Intel still holds a 73.1% CPU market share, AMD’s share has crept up to new highs at 26.9%. Arya said the adoption of new 6000 series GPUs will likely drive a shift to higher-end GPUs in the medium-term.

Arya said Nvidia and AMD remain his top GPU stock picks due to exposure to massive, secular growth trends such as high-end gaming, artificial intelligence, advanced autos and cloud computing, and the opportunity to continue gaining market share from Intel and other competitors.

Benzinga’s Take: You’d be hard-pressed to find many analysts that question AMD and Nvidia’s impressive growth outlooks. As with many stocks in the market today, the debate over these two stocks hinges primarily on valuation, with AMD trading at 12.7 times sales, Nvidia trading at 21.7 times sales and Intel trading at just 2.6 times sales.