AMD ( AMD) is buying ATI Technologies ( ATYT), but the merger's main beneficiaries might be the companies' chief rivals in the graphics-chip market -- at least in the short term.
Longer term, the deal could well benefit AMD, and it may be crucial in its battle against Intel ( INTC). But over the next six to 12 months, promotions and counter-moves by rivals, as well as merger-related distractions at AMD and ATI, will likely lead to near-term market-share gains for Intel and Nvidia ( NVDA) -- ATI's two top challengers in the graphics business, analysts say. "In three years, Nvidia may not have a place to stand" if the market evolves in a way that favors ATI's integration with AMD, says one technology analyst who asked not to be named but whose firm has not done investment banking with AMD, Intel, ATI or Nvidia. Until then, though, "Nvidia makes out like bandits," the analyst adds. Nvidia's brand is in great shape, analysts say. It currently has a leg up on ATI in technology and has been gaining share in recent quarters with its latest line of "discrete" graphics processors, graphics chips that work largely independently of CPUs. That position isn't going to change with the merger. Indeed, Nvidia may become more attractive to computer makers, because it will be the only major independent producer of discrete chips, analysts say. That should give the company an entrance to a wide range of systems, whether they are based on AMD, Intel or IBM chips, and different manufacturers, say analysts. Nvidia is "not tied to any specific chip vendor," says Dean McCarron who covers the graphics chip industry as a principal analyst at Mercury Research. "They've got a more defendable position of neutrality."