AMD Beats Intel in Market Value for the First Time in History

In the world of computer chips, Intel has been a dominant player for over 50 years. Founded in 1968, the company has held the top spot in the chip market for 25 years and remains America's largest chip company by sales. However, in 2022, Intel's long-time rival, AMD, took the top spot in market value, breaching a market cap of over 200 billion. This was the first time that AMD had ever overtaken Intel, and it can be traced back to one risky and expensive decision that AMD made that changed the game, not just for the company, but for computing.

To understand how AMD finally caught up to Intel, we need to go back to the beginning. In 1968, a small group of engineers founded Intel, a startup dedicated to chips, which are essentially the brains of a computer. Intel prioritized development from the start and didn't report any sales in the first six months. Meanwhile, a former coworker of those engineers founded AMD, which was making chips that Intel had already made, focusing more on keeping up than getting ahead. However, by 1970, Intel released the first semiconductor memory chip, and a year later, it was the best-selling semiconductor device in the world. AMD's hardware didn't sell the same way, and the company came up as an Intel copycat, making alternatives to Intel chips that were a little bit cheaper.

Central processing units, or CPUs, are essentially chips that solve problems. By 1971, Intel released the first programmable microprocessor, another success. The company churned out new chip after new chip, creating industry-standard after industry standard. By 1997, Intel chips served as the brains of 84% of the world's computers. It had 10 times AMD sales and six times its manufacturing capacity.

Going into the new millennium, AMD's market value lagged behind Intel's. Fast forward to late 2014, when the company tasked new CEO Lisa Su with turning things around. Before Su's tenure, the company had fought off rumors it would be sold and laid off workers. So behind the scenes, Su began working on a new innovation.

AMD released a new design for their high-performance chips that beat many of Intel's benchmarks. First, the transistors were organized in a new way on the chips called Zen Architecture. At the same time, AMD rethought how chips themselves were made. Intel had been focusing on making a single CPU answer questions really, really fast. AMD decided that for some of its chips, it moved to chiplets. Instead of having one big silicon chip, there were multiple small chips in the same package, connected together and acting like one CPU. This chip redesign was the pivotal factor that gave AMD an edge.

Experts said that comparable AMD CPUs were less expensive and faster than Intel's. By mid-2018, its market cap had shot up to over 30 billion dollars. Almost exactly five years after the release of Ryzen in 2022, AMD passed Intel in market cap for the first time, but it didn't hold that spot for long. Still, it reflects the investor sentiment about the future of the two companies. Clearly, investors see a lot of positive things in the future for AMD, given its share gains against Intel.

However, it is important to note that the sales of PCs, which drive CPU usage, have slumped in recent years. In the second quarter of 2022, shipments dropped in the steepest decline in nine years. In July of 2022, Intel posted weaker-than-expected results for the second quarter, citing a "challenging environment" and lower demand from data centers. This caused a dip in Intel's stock price, but it remains to be seen whether AMD will continue to hold its lead or if the market will shift once again.

In conclusion, AMD's decision to take a risk and redesign its chips paid off in a big way. By thinking outside of the box and focusing on innovation rather than just keeping up with Intel, AMD was able to catch up and even surpass its long-time rival. This serves as a lesson for all companies, not just in the tech industry, that taking calculated risks and investing in innovation can lead to significant success. The future of the CPU market is uncertain, but one thing is for sure: AMD has cemented itself as a major player and a force to be reckoned with.