But AMD never grabbed the initiative to build on their fab capabilities and manufacturing processes, instead continuing to focus just on low cost CPUs.
Fabs cost money. It's not about initiative, but the ability to pony up billions for several years. Billions they never got because Intel bribed the major OEMS at the time to refuse to put AMD in their products, or to include them only in their shittiest products, and at small volumes. Even when the Ahtlon 64 was eating Pentiums for breakfast. Dell's existence was basically subsidized by Intel during these years thanks to the bribes
During the several years AMD had the performance crown, they were largely relegated to dumpster tier OEM products or custom built enthusiast PCs (not the largest market segment) due to Intel's illegal business practices. The 1 billion fine Intel was eventually slapped with is pocket change compared to the opportunity cost of the revenues they could have earned during their time in the sunshine, and how they could have used those missing dollars in R&D, operations and marketing.
they also had a 2-3 generation advantage in terms of process nodes. Ultimately, AMD threw in the towel and sold off their fabs to Global Foundries.
Intel only pulled ahead of AMD in the process node race at ~32nm, years after they fucked AMD over financially. And process node shrinks are a function of how much money you can throw at the problem. Since the smartphone explosion lead to major money and mindshare being thrown at third party fabs, TSMC and Samsung are quickly catching up to Intel, and look to be on the verge of surpassing Intel in the next few years. Intel's lead was once thought insurmountable, now these upstarts are snapping at it's heels.
And unlike the time when AMD acquired another great CPU team, this time, there are no CPU teams left to acquire.
AMD's hardware teams are easily among the best in the industry, high profile hires are just one part of the story. Intel and nVidia engineers readily acknowledge that fact all the time. Under much more resource constraints than the two incumbents, they regularly put out hardware that challenges and even beats what the two industry behemoths put out. Their driver/software people are a different story, but that's understandable when you compare AMD's workforce (~9000) to Intel (`100,000) or nVidia (~10,000).