By Nigam Arora
AMD is cutting into Nvidia’s early lead in artificial intelligence for cars.
Jim Keller, a former AMD /zigman2/quotes/208144392/composite AMD +2.86% chip designer, now works at Tesla /zigman2/quotes/203558040/composite TSLA +0.67% . (Keller also previously worked at Apple /zigman2/quotes/202934861/composite AAPL +0.10% .) The news is that Tesla is working with AMD on a new custom artificial intelligence chip at the expense of Nvidia /zigman2/quotes/200467500/composite NVDA +0.59% . To be sure, a Reuters report said there’s no formal agreement.
Still, let’s explore the dynamics among AMD, Nvidia and Intel /zigman2/quotes/203649727/composite INTC +0.36% .
Please click here for an intraday annotated chart of AMD. The most important information for investors to glean from the chart is that the VUD indicator stays strongly green as AMD’s stock price traces an explosive move up. The VUD indicator is the most sensitive measure of supply and demand in real time. Typically when AMD moves up on news, the VUD indicator first becomes green and then turns orange. Green indicates net buying; orange indicates net selling. This happens because as the momo (momentum) crowd runs up the stock, the “smart money” typically sells into the strength.
Please note from the chart that during the latest AMD price move, the VUD indicator stayed green throughout. There was no selling by the smart money into the strength, as has been the case in the past.
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Not a surprise
At The Arora Report, the news is not a surprise. It was anticipated for the following reasons:
• It is a good practice for companies to not become totally dependent on chips from one company. Companies often seek to diversify.
• It is only a matter of time before Tesla will be competing with electric cars from BMW /zigman2/quotes/200850296/composite BMWYY -1.70% , Daimler /zigman2/quotes/203566154/composite DDAIF -0.60% , GM /zigman2/quotes/205226835/composite GM +0.90% , Ford /zigman2/quotes/208911460/composite F +1.09% and Toyota /zigman2/quotes/200537742/composite TM +0.56% . It behooves Tesla to develop its own intellectual property. Here Tesla is using AMD intellectual property to design a custom chip. In the process, Tesla will build significant intellectual property of its own.
• AMD had a relationship with an ex-staffer now at Tesla.
There is no significant financial impact on AMD and Nvidia.