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AMD’s Latest Challenge To Intel Are Chips That Cost Half As Much

February 22, 2017, 2:00 PM UTC
General Views Inside Computex 2014
Visitors walk through the Advanced Micro Devices Inc. (AMD) booth at the Computex Taipei 2014 expo at the Taipei Nangang Exhibition Center in Taipei, Taiwan, on Tuesday, June 7, 2014. Computex runs through to June 7. Photographer: Chris Stowers/Bloomberg via Getty Images
Photo credit: Bloomberg via Getty Images

Advanced Micro Devices is hoping to shake things up in the market for high-end desktop computer processors with a new chip line, claiming to match the performance of some of Intel’s best chips at half the price.

The embattled Intel competitor has dropped to a market share of only about 5% for PC processors, but the new Ryzen chips unveiled on Wednesday should improve the company’s fortunes in the view of Wall Street analysts and investors. AMD’s stock price has rocketed from $2 per share a year ago to close at $14 on Tuesday, in part over anticipation that Ryzen will be a big hit.

Under CEO Lisa Su, an electrical engineer and chip designer who took the top job two and a half years ago, AMD has clawed its way back after having been all but obliterated by larger competitors Intel and Nvidia. Initially, gains in graphics and video gaming console chips, as well as a savvy deal to license server chip designs in China, impressed investors. Now expectations for Ryzen are driving the stock price higher.

At the top of the new line introduced on Wednesday, the flagship Ryzen 7 chip, dubbed the 1800X, will have 8 processing cores and run at a speed of 3.6 GHz. That’s comparable to a $1,000 Intel Broadwell chip, but AMD will charge only $500 for its new processor.

AMD says its new chip runs some common benchmark tests 9% faster than the comparable Intel chip. But the company hasn’t made the chip available to outsiders for third party reviews, so it’s claim cannot be verified yet. That test will come shortly.

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The company says it is starting with chips for desktop computers and then will offer new chips suitable for corporate servers, under the brand Naples, starting in the second quarter. Chips aimed at mobile laptops will come in the second half of the year.

“This year is a huge year for us,” Jim Anderson, the senior vice president at AMD in charge of computing and graphic chips, tells Fortune. “The market’s been a little starved for innovation frankly. Our competitor has taken a very incremental approach the last few years.”

With AMD conducting briefings earlier in the week, some of its claims and test results leaked out. Intel issued a statement urging customers to wait for fuller testing of the new chips. “We take any competition seriously, but as we’ve seen, consumers usually take a ‘wait and see’ approach on performance claims about untested products,” the company said in a statement to Fortune. Intel said its latest, seventh generation Kaby Lake chip line “delivers the best experiences,” adding “with 8th Gen Intel Core, and new technologies like Intel Optane memory coming soon, Intel will not stop raising the bar.”

All of the chipmakers have been hurt by years of sinking sales of desktop computers, in part because upgrading a PC no longer brings massive gains in performance from better computing chip compared with previous versions. Intel’s last few generations of chips for desktop computers have brought only modest gains—the company claimed improvements of 12% to 19% for its most recent Kaby Lake round of chips, for example.

AMD’s strategy focuses on bringing similar performance but at a much lower price. The company says it is focusing on the high end PCs used for gaming, video editing, and other tasks requiring more computing power. Sales in that segment have been stronger, as consumers appear to be willing to pay more for even the modest gains available.

Intel, by contrast, has said it is shifting resources to focus on server chips as its top priority market.

Ryzen’s price and performance impressed analyst Patrick Moorhead, president of Moor Insights & Strategy. “This is a very positive start for AMD with Ryzen and so far, everything AMD has said about Ryzen has been confirmed to be true,” Moorhead wrote in an initial analysis. “This is a good example of AMD CEO Lisa Su’s ‘under-commit and over-deliver’ in action.”

AMD said individual consumers who prefer to build their own PC systems will be able to pre-order Ryzen chips starting on Wednesday, with deliveries starting on March 2. Pre-built systems with Ryzen chips from PC manufacturers will follow shortly thereafter, AMD says. The new chips will be compatible with systems running graphics cards made by AMD and those from rival Nvidia (NVDA).

For more on CEO Lisa Su, watch:

Some analysts have speculated that Apple (AAPL) may be interested in using the latest AMD (AMD) chips, amid rumors the Mac computer maker was frustrated with delays in high-end chips from Intel (INTC). Anderson declined to comment about the possibility.