Fabrizio Bensch/REUTERS
A technician of computer microprocessors maker AMD poses for the media with a wafer at the chip plant in Dresden October 24, 2006. AMD celebrated its 10th anniversary of the AMD plant in the eastern German city of Dresden on Tuesday.
- In February, AMD revealed that it has been working with Google on a video game streaming service.
- At the Game Developers Conference on Tuesday, Google announced that the two have created a new chip for the service, which will officially be called Stadia.
- While AMD has been struggled to compete at the high-end graphics, it has some secret weapons that can win it in the cloud gaming space.
- Watch AMD trade live.
AMD has a "significant" opportunity from Google's cloud gaming initiative, Morgan Stanley says.
In February, AMD revealed that it has been working with Google's Project Stream, a video game-streaming service it began testing late last year. CEO Lisa Su announced during a CES 2019 keynote that Google's service is using AMD's Radeon GPUs.
At the Game Developers Conference on Tuesday, Google officially announced that the service will be called Stadia, and that it had created a new chip with AMD to power it. AMD shares were up 7.2% to $24.92 apiece following the announcement.
Google's choice to use AMD chip as a basis for the Stadia cloud gaming service is reasonable because the markets have underestimated AMD's success in graphics space, according to Morgan Stanley analyst Joseph Moore.
"AMD's role is more significant than we had thought," Moore said in a note out on Tuesday morning.
AMD has struggled to compete at the high-end graphics because it has to use substantial amounts of "high bandwidth memory," which has fairly prohibitive costs to get to high levels of performance, Moore said.
Rival Nvidia has also slammed AMD's gaming graphics card. In January, when AMD launched its new 7-nanometer Radeon VII gaming graphics card, Nvidia CEO Jensen Huang described the performance as "lousy" and said Nvidia's RTX 2080 would "crush" it in benchmarks.
But Moore says AMD has some secret weapons that it can use to win in the cloud gaming space.
"The bottom line is that AMD graphics chips are built with a hardware virtualization scheduler," he said. "AMD has essentially built the functionality into the hardware to maintain a consistent commitment of a portion of the hardware to each user, versus Nvidia which uses a software layer to determine those connections."
He continued: "AMD's methodology offers better security and lower latency, all else being equal, which has helped them to find favor with cloud providers despite GPU performance which lags Nvidia. This would appear to be a significant advantage that would pertain to new cloud gaming markets as well as making AMD the beneficiary of the initial Google deployment."
AMD was up 32% this year, including Tuesday's gain.
MI
Get the latest Google stock price here.