AMD's partnership with Tesla likely won't be enough to beat Nvidia
AMD and Tesla are reportedly partnering to develop a custom chip for autonomous driving, though it may not be enough to usurp Nvidia's dominant position in autonomous driving chips.
Tesla is known for its aspirations to vertically integrate its business as much as possible, and its partnership with AMD could be a move toward that goal.
Currently, the carmaker uses Nvidia chips to power their self-driving technologies. Nvidia also supplies self-driving technology to car companies across the globe like Audi, Volkswagen, and Toyota.
AMD spiked after the news was first reported by CNBC on Wednesday after the market close, and is trading 0.69% higher Thursday morning. Tesla is basically flat on the news, trading 0.06% lower on Thursday. Nvidia fell on the news and is down 2.03% on Thursday.
Mitch Steves, an analyst at RBC, thinks the move doesn't rule Nvidia out of the picture for Tesla or the auto industry as a whole. He said that it will likely result in AMD taking business from Nvidia around the edges, but that Nvidia will likely remain the market leader.
"We view the announcement as a near-term concern that should not impact the story over the next several years," Steves wrote in a note to clients.
Steves thinks the chip being developed in the Tesla-AMD partnership will focus on specific computing tasks, while the general processing will still be handled by Nvidia's chips.
Mark Lipacis, an analyst at Jefferies, mostly agrees on the level of impact it will have on the autonomous car market and AMD's place in that market. He said that the Tesla partnership will likely only impact AMD's earnings by $0.02-0.03 in 2018.
It would be a "critical win" for AMD though, as the company shows it can compete in the world of artificial intelligence computing that is coming to dominate the next generation of computers, Lipacis said.
Lipacis said in a note to clients that Nvidia will likely take a hit in the short term, but will still come out on top in the long term.
"From a volume perspective, Tesla represents less than 1% of the global autos market, and we think the potential to segment the market may be a possible alternative to another sole-source supplier transition," Lipacis said.
AMD is up 23.34% this year, including the post-new bump. Nvidia is up 77.33% and Tesla is up 73.39% this year.
