Does AMD's Rise Help Explain Nvidia’s Fall?

Nvidia (NVDA) on Wednesday afternoon projected a sharp shortfall in second-quarter revenue, blaming issues that caused PC buyers to spend less on graphics technology. But there’s a competing explanation, one more flattering to rival Advanced Micro Devices (AMD).

If the first theory is right, other suppliers in the computer industry’s food chain could face a hiccup in demand. But data from an influential market research firm suggest that Nvidia has its own special problem–tougher competition from AMD, the fruits of a controversial acquisition that is showing new signs of paying off.

AMD, which has battled Intel since the 1980s in the market for microprocessors, four years ago announced a deal to pay a whopping $5.4 billion for ATI Technologies. The deal saddled AMD with a crushing debt load, but it also provided two new weapons: graphics chips–the complex processors that make videogames look realistic–and accessory products called chip sets that connect a microprocessor to the rest of a system.

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