Here's Why NVIDIA Corporation's GameWorks Is Perfectly Fair

In a recent article at Forbes, an AMD executive essentially called foul on GameWorks -- NVIDIA's complete suite of graphics, physics, and ray tracing libraries and code samples designed to help developers get the most out of NVIDIA graphics hardware. GameWorks not only helps developers make their games look and perform better, but it also serves as a competitive edge for NVIDIA.

And it's completely fair.

Graphics isn't all about hardware
In the discrete graphics space, only NVIDIA and AMD remain as serious players. Both companies release products at aboutthe same cadence, and both build their graphics products on similar manufacturing processes with similar transistor budgets. From a hardware perspective, there's room for innovation and differentiation at the architectural level, but both companies, at least for high-end gamers, are quite good at developing graphics hardware.

To truly differentiate with graphics solutions, it's not enough to build the fastest or most efficient underlying hardware, since graphics performance and quality are tied to both the quality of the drivers -- that is, the software that acts as a bridge between the game code and the underlying hardware, as programmers don't usually talk directly to the hardware -- and the optimization of the game code for graphics hardware.

This is where NVIDIA's focus is an advantage
AMD's R&D budget is actually smaller than NVIDIA's. However, while NVIDIA focuses its R&D on Tegra, Tesla, GeForce, and Quadro -- the latter three all using the same or similar silicon -- AMD spreads out its R&D across a number of projects, including:

  • Two lines of X86 CPU cores (the small "Cat" cores and the larger cores such as Bulldozer, Piledriver, and Steamroller).
  • An ARM Holdings-based custom CPU core.
  • Various system-on-a-chip products for PCs and servers, and embedded.
  • Discrete graphics products for PCs, workstations, and high-performance computing.

AMD Research and Development Expense (Quarterly) Chart
AMD Research and Development Expense (Quarterly) data by YCharts

Since NVIDIA has a higher R&D budget to focus on a narrower set of products, it's only natural that it has the capability of investing heavily in providing useful tools and support to developers to provide key competitive advantages in a space where both players provide competitive underlying hardware. This isn't unfair -- it's just how competition works.

Foolish bottom line
AMD has chosen a strategy where it wants to participate in just about every market it can think of. There is merit to such a strategy, but it does mean that in any given market, AMD is unlikely to be the leader, as we've seen with PCs, servers, and graphics. NVIDIA, on the other hand, has chosen a strategy where it doesn't try to take on the world if it's clear that it doesn't have a competitive edge -- a lesson NVIDIA learned from its Tegra 4i launch.

Both can succeed, but right now NVIDIA is in far better financial shape than AMD is, with a ton of cash on the balance sheet, high gross margins, and much more robust profitability. That said, it'll be interesting to see how well AMD's strategy plays out over time. But the fact remains that what NVIDIA is doing with its GameWorks and developer relations is not only completely fair, but it is also exactly how competitive markets are supposed to work.

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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple and NVIDIA and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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