NVIDIA's New Obsession
With the world now moving toward a portable computing platform, the need for graphic chipsets has been on the rise. Computer-chip maker NVIDIA (NAS: NVDA) has been focusing its energies toward this particular segment, slowly reducing its dependence on the traditional PC chips. I noted this in my previous article on the company. Let's take a look at how the move may affect NVIDIA's performance going forward.
Over the years, NVIDIA has primarily been a manufacturer of graphic processing units for PCs. If we look at the company's compounded annual revenue growth over the last five years, it stands at 7.5%. However, there has been almost no revenue growth in the past year, partially due to cyclical weakness in the PC market and partly because of consumers shifting toward mobile computing platforms such as tablets and smartphones. Another thorn sticking in NVIDIA's side is industry heavyweight Intel (NAS: INTC) , which commands a 60% share in the GPU market for PCs.
Exploring new horizons
However, the company reported a 25% surge in revenues in the just-concluded quarter as it saw strong sales from chipsets manufactured for notebooks. It seems portable computing is the way forward for NVIDIA. But in my opinion, it won't be prudent to completely step off the gas as far as desktop chipsets are concerned. Although PC sales have slowed down in Europe and North America, they are still on the rise in developing markets like India and China. This particular fact shouldn't be ignored if the company looks to multiply revenue and keep its nearest competitor -- Advanced Micro Devices (NYS: AMD) -- at bay.
NVIDIA has been making significant moves to capitalize on consumers' growing preference for mobile computing platforms. It won design contracts with Samsung, LG, and Motorola (NYS: MMI) for the NVIDIA Tegra processors which are used in smartphones and tablet computers. This allows NIVIDIA to tap the growing market for Google's (NAS: GOOG) popular Android-based devices.
The Foolish bottom line
NVIDIA is moving toward the next frontier in computing technology and this will, in all probability, reap rich rewards for the company. NVIDIA looks to beat Street expectations in the current quarter. Given the design wins it has notched, it looks like an intriguing stock going forward.
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At the time this article was published Fool contributor Harsh Chauhan doesn't own any shares in the companies mentioned in this article. The Motley Fool owns shares of Google. The Fool owns shares of and has bought calls on Intel.Motley Fool newsletter serviceshave recommended buying shares of NVIDIA, Intel, and Google, as well as writing puts in NVIDIA and creating a diagonal call position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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