The Tycoon Report

Intel vs. AMD

Wednesday, April 11, 2007 | Wayne Mulligan

OK, I’m going to do something a bit different today. 

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And now, on with the show...

As resident “tech geek” here at Tycoon, I feel it’s only right that I begin to give you a real education on some of the technologies behind the stocks I discuss here in The Tycoon Report.

Now, don’t get nervous!

I’m not going to be giving a lecture on binary code.  I’m going to take a seemingly complex topic – today, it will be Microprocessors (e.g. the things that Intel or AMD makes that are sitting inside your computer right now) – and simplify it.

You may be asking yourself, “Why do I need to know this.  How will it help me?”

Good questions – and the simple answer is, the more you know about a particular technology, the more you’ll understand the companies that produce it.  The more you know about those companies, the EASIER it will be for you to make money … Bottom line!

I know semi-conductors and microprocessors may seem like something that only a person with a Master’s degree in Computer Science would understand, but in reality, it’s simpler than you think.  Let me tell you what I mean …

The Biology of Your Computer

Pretend that your computer is a human being.  The screen is the face of the computer and allows it to talk.  It’s also the first thing to be seen, and if it’s old and ugly, you’ll likely want to find a pretty, new one (hence everybody switching to sleek, flat-screened monitors.)

This article is actually about the “brain” of the computer, which is known as the Microprocessor or Central Processing Unit (CPU).  It’s here where all computations and calculations are made.

This is the core of your computer, just as the brain is the core of the human body.

And that is precisely what companies like Intel (Nasdaq: INTC) and AMD (NYSE: AMD) manufacture.

Now, wouldn’t it be great to have a “better” brain?  I mean, if you could somehow make your brain more efficient or smaller so “more brain” could fit into your head -- wouldn’t that be better?

Biology aside, the obvious answer is yes.

That’s essentially what companies like Intel do when they release a new version of a microchip.  The difference between a Pentium III and a Pentium IV chip is essentially the number of transistors (brain cells) that Intel can pack onto that microchip.

Think of these transistors as you would think of brain cells.  The more brain cells we can pack into our brains, the smarter we’ll be!

More than One Brain?

Now consider this:  What if we could have more than one brain in our heads?

What if we found a way to attach a brand new brain to our bodies somehow?  Biology aside, this should make us considerably smarter than before, right?

With two brains, we could not only come to single decisions more quickly, but also ponder multiple problems at the exact same time.  

For example, should I have eggs or pancakes this morning, and should I wear my green sweater or grey sweater?  For all of us bachelors out there, you know how difficult some of these decisions can be!

This is exactly what happens inside a computer that has multiple processors.

Having multiple processors, however, requires specialized “motherboards” (the circuit boards which house the microprocessor chips).  Let me explain …

Think about attaching a new brain to the human body … we’d probably need another head (or a bigger one) to actually store the new brain.  As you can imagine, this causes a number of issues, and these issues also arise for computers with more than one chip.

So what’s the solution?

More "Sides" to the Brain?

If you’ve ever taken an Intro to Psychology course, you know that we have a number of distinct areas in our brains which are called lobes.  The function we want to perform (seeing, hearing, even dreaming) will determine which area of the brain we use.

Now, what if we could keep our brain exactly as it is, but create additional lobes, or “cores” in our brain?  

The more specialized we could make our brains for specific tasks, the more quickly we could accomplish them.

I hope everything is clear so far because now we’re entering the realm of “Cutting Edge Technology”!

The same applies to a new form of Microprocessor design.  We now have the ability to take a single microchip and add extra cores (or lobes) to it.  This is the same way our brains allow us to see and hear while processing those two forms of data (visual and audio) simultaneously.

Multi-core processors allow computers to do the same thing as our brains, within the confines of a single chip (no extra head needed.)

Having multiple cores on a single chip, as opposed to having multiple chips, obviously saves space, which in turn saves money.  This is why the new battle lines in the Microprocessor wars have been drawn around the multi-core chip lines.

Intel vs. AMD vs. ???

This is one of the reasons AMD did so well last year.  The company managed to beat Intel in performance tests (and in sales) due to its multi-core processor.  This was obviously a HUGE hit with the business crowd as these are the “brains” that can inexpensively power high-end server equipment.

These multi-core chips were also part of the reason why Intel’s stock performed so poorly last year.

However, the fight is far from over.

Intel launched its own multi-core processor, and recent benchmark tests show Intel’s chips beating out AMD’s.  Sooner or later the stock market will realize the value and staying-power of Intel, and value the stock accordingly.

I’m sure you remember my recommending Intel earlier last year.

AMD and Intel aren’t the only kids on the block, though … there are other companies on the horizon which are coming to the party, too.

A number of well-funded startups boast chipsets with hundreds of cores on each chip.  These produce less heat and cost less than some of the offerings from the big boys like Intel and AMD.

For instance, Rapport, Inc. is already marketing a chip that has 256 cores on it!

There are a number of trade-offs, however, so this isn’t to say that this company has a chip 256 times “better” than anything Intel or AMD currently produces.

What it does indicate, however, is a shift in the way mainstream chipsets will be designed and marketed from here on.

It’s important to remember, though, that the big boys are still the big boys, and going up against them might not be the best option for a small, privately held startup company.

In my opinion, you can expect to see a lot of consolidation and acquisitions in this area going forward.  

So keep your eyes peeled.  There are profits to be made here, but only if you understand the technology!




Wayne Mulligan
Contributing Editor
The Tycoon Report