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This past week, 99.7 percent of ATI stockholders voted in favor of AMD’s acquisition of ATI. There was almost no question for these stockholders that aligning themselves with the fastest growing chip company and number two worldwide supplier of microprocessors would be beneficial for the GPU company. With the ability to pair ATI’s already advanced graphics processing units with AMD’s efficient, fast, and energy-saving microprocessors, and with the further gains from integrating the two systems together, the acquisition should turn out quite well for both companies involved.
But if NVIDIA stockholders were given the ability to vote at the ATI shareholder meeting mentioned earlier, they would have voted even more overwhelmingly in favor of the acquisition. In fact, since AMD announced it would attempt a friendly takeover of ATI in July of this year, NVIDIA’s shares stopped plummeting and have since grown over 73 percent.
 NVIDIA’s shares from May-Present. Notice how stock prices, which were quickly decreasing, took a turn for the better right around the time of the AMD and ATI merger announcement. Image courtesy of MSN|Money |
This result may sound counterintuitive at first. In fact, one may think that the pairing of ATI and AMD would create a juggernaut, an incredible foe that NVIDIA would have to wrestle with. This would most likely have the opposite effect on NVIDIA shares, driving them down in value, instead of straight up through the roof.
Some might argue that this stock price jump resulted from shareholder expectations that Intel, AMD’s largest rival, will soon purchase NVIDIA. This doesn’t make much sense, however, for two reasons. First, Intel is a sinking ship, and no NVIDIA shareholder wants to sink with it. Second, Intel already devotes thousands of its employees to graphics processors (however inferior some believe they are), and so the overlap of resources by acquiring NVIDIA would be wasteful.
Upon careful examination of the results of the merger, however, the opposite becomes clear: ATI is using this as an opportunity to step out of the high-end market and into the general consumer market. With 3DLabs already bowing out of the high-end 3D GPU industry, this leaves NVIDIA the only company that will be supplying top-notch graphics processors to the DCC industry.
This becomes all the clearer once you consider AMD’s goals and the announcements at the most recent ATI shareholder meeting. AMD’s slogan is “50 by 15”, a reference to the fact that they want 50 percent of the world’s population to own computers by 2015 (presumably with AMD processors in them). ATI’s President and CEO, David Orton, echoed this sentiment at the latest ATI stockholder meeting, saying he believed that they can make available $100 personal computers “before 2010”.
The kinds of computers that will cost $100 and will be available to a half of the global population will most definitely not be the kinds of computers that one could use a serious 3D modeling program on, let alone render a scene (in under a week). Although AMD’s goals are laudable, they also mean that a powerful 3D GPU company, ATI, has just stepped out of the running for producing graphics processors for our use.
No wonder NVIDIA shareholders were excited; now they are the unparalleled dominators of the high-paying high-end market.
Whether or not this is a cheerful outcome for the DCC industry as a whole remains to be seen. Usually when there’s only one unchallenged ruler of an industry (NVIDIA), the results are bad for consumers (us), because the ruler can charge incredibly high prices and produce otherwise inferior goods, because, after all, who are the consumers going to turn to instead?
At the same time, NVIDIA may try to keep at the cutting edge of quality and price in order to deter potential future challengers, and to ensure it gets repeat business from all of us. I certainly hope it chooses the latter option, since it looks like I will be buying quite a few NVIDIA cards well into the future.
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