Gaming on the Right Track
Joel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Chipmaker NVIDIA (NASDAQ: NVDA) is on a roll, as it clocks robust growth in the surging tablet and mobile devices market. The California based company has already estimated revenue for the month of October at about $1.25 billion, more than what analysts at Bloomberg expected.
NVIDIA has recently bagged numerous orders from various Smartphone and tablet makers such as Google for the Nexus 7, which uses its latest Tegra 3 Quad core processor and Microsoft for Microsoft Slate. It also powers HTC’s not-so popular One X and lesser known Fujitsu’s Arrows X. Whew!!!
The graphics chip is the world's first mobile super processor. NVIDIA has estimated that its revenues would grow about 12% which is much more than other competitors in the field. Rivals are expecting a rough ride in the upcoming quarter. For example, Advanced Micro Devices (NYSE: AMD) has lost more than 50% of its market value since last year and is continuing with its downward trend. Intel (NASDAQ: INTC) says that it is coming out with new energy efficient processors for PCs this month, but we don’t really know if that would be very successful for the company. The company recently lowered its sales outlook for the third quarter citing a weak demand environment for personal computers. NVIDIA on the other hand sees a lot of growth, not only in the tablet market but also in the PC gaming industry.
The company is making the right move considering the soft demand in the PC business. Second-quarter PC sales fell 0.1%. But the NVIDIA Kepler GPU introduced in March this year has captured the PC gaming market by storm due to its ultra high efficiency and processing power. It is also the world’s first GPU for cloud computing. There’s enough room in this area and NVIDIA has been innovative enough to capitalize on that. Further, the company recently introduced the Tesla K10 and K20 GPU for high-performance computing, which is anticipated to grow in a big way in the next quarter as it begins to ship.
The Road Ahead
Despite being one of members of a fast growing product category in the consumer electronics industry, NVIDIA still faces competition from the likes of Texas Instruments and Samsung. Another competitor is Qualcomm (NASDAQ: QCOM), whose chipsets currently find a place in two of the most dominant mobile ecosystems worldwide, the Android and the iOS. It also remains the LTE leader by quite a margin. But unlike NVIDIA’s Tegra processors it faces 28-nanometer chip shortages.
The CEO of NVIDIA says that its roadmap has ‘Tegra and Tegra only’. They seek to develop the product further. This graphics company is making ambitious moves, and is not restricted only to Tegra. It’s also making its presence felt in the mobile market with faster and energy efficient processors through the acquisition of Icera. The company is also working with Chinese computer company Lenovo on developing a “convertible notebook.”
Tegra posted an increase in revenue of 36% to $179.7 million, according to the company. For the second quarter of fiscal 2013 ended July 29, the company showed revenue of $1.04 billion, up 2.7% from the prior year period. But there are supply shortages of the 28 inch nanometer chips from TSMC (NYSE: TSM) which probably will be there the full year. It has also turned down Apple’s offer to manufacture chips for its wireless devices recently for the same reason. CEO of NVIDIA Jen-Hsun Huang said TSMC is doing their best to resolve the problem as fast as possible.
The Foolish Take
There is no reason why anyone should not be positive about NVIDIA. Everything seems to be going well on all fronts. Their decision to enter into the mobile device market is reaping good results, and Tegra is making all of this possible. The Kepler is also positioned in a profitable area. Short term shortages are nothing to be bothered about, keeping in mind that the problem is temporary in nature.
All in all, this stock definitely seems to be on the good side of all investors. So let us know what you think of this bright stock.
Joel has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel, Microsoft, and Qualcomm. Motley Fool newsletter services recommend Intel and NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.If you have questions about this post or the Fool’s blog network, click here for information.