Nvidia Corporation's (NVDA) gaming segment accounted for a staggering $1.8 billion in revenue in the second quarter, but some analysts fear a challenge from a rejuvenated rival in Advanced Micro Devices (AMD) moving forward.
"AMD is kind of resurgent after a long period of time when they fell behind [in gaming]," Oppenheimer & Co. analyst Rick Schafer told Real Money.
He added that "the loss of market share from competition with AMD in GPUs" is one of the key risks he sees for Nvidia moving forward.
His concern over market share is not aided by AMD's own reported growth, which was reflected in AMD CEO Lisa Su's remarks to analysts during the company's July 25 earnings report.
"Sales into the high-end enthusiast and performance portions of the gaming market grew substantially year-over-year based on the adoption of our latest Radeon RX 500 and Vega series GPUs," she explained.
A 10-Q document filed by AMD on August 2 reflects revenues of $1.76 billion in the second quarter, a 53% increase from the prior year quarter, driven in part by increased demand for Radeon products.
Morgan Stanley analyst Joseph Moore echoed Chafer's concerns over the narrowing gap between the competitors.
Among his key risks to growth for Nvidia, he cites the danger of a situation wherein "AMD reemerges as a viable GPU competitor after a period of disarray."
Yet, not all analysts were convinced on the legitimacy of AMD's renewed move into Nvidia's market for gaming.
"At current prices, NVDA continues to offer a tremendous buying opportunity ahead of Gaming product launches in [2018]," Evercore analyst CJ Muse said, affirming a price target of $275 alongside an outperform rating in his note on August 16.
"Further, with higher-end Turing Gaming GPUs expected to ramp first, we see upside to gross margin estimates through calendar year 2018," he added.
As gaming revenue for Nvidia's gaming segment reflected 52% growth year over year and AMD's computing segment, including gaming, grew 53%, gaming will be an interesting space to watch as consumers determine if its big enough for both of them.
