NVIDIA's CEO Goes Bullish
The markets continued their topsy-turvy ways, with the Nasdaq opening down 2.5% today. Optimism built throughout the day, closing the losses to just 0.26% by the time the closing bell rang. Today, we're checking in on two of the top storylines developing over the past 24 hours in technology.
Tech News No. 1: NVIDIA roars
With earnings season over, investing conferences are back on the agenda. One of the heavy hitters this week is Citi's Technology conference, which runs through Thursday. These conferences can give a good overview of different technology companies' trajectories, but they're also notable because companies will routinely drop new material information on their businesses.
In today's early session, Broadcom's (NAS: BRCM) CFO rebutted earlier reports the company had instituted a hiring freeze. Broadcom's one of the better-positioned chip companies, but even it's not immune to the large semiconductor slowdown. Last quarter, sales slowed to 12% year-over-year growth, their lowest rate since the third quarter of 2009. Still, the company's assurance that no hiring freeze is in effect might calm shaky investors growing accustomed to seeing semiconductor companies walk back estimates.
In the afternoon session, NVIDIA (NAS: NVDA) CEO Jen-Hsun Huang shed some more light on NVIDIA's future revenue growth. Along with a press release on the company's website, NVIDIA issued guidance for fiscal 2013 -- a period that starts next January -- between $4.7 billion and $5 billion. That's a nice step from the $4.45 billion analysts were expecting.
The bullish forecast was foreshadowed earlier in the day, when Huang stopped by the Dow Jones offices and forecasted that the company's mobile unit will generate $1 billion in sales next year, as reported byBarron's Tech Trader Daily writer Tiernan Ray. That heavy sales growth indicates that the company is finding its own niche in the industry against larger rival Qualcomm (NAS: QCOM) .
However, NVIDIA's Tegra mobile processor is still only about 20% next year's forecast. Plugging in NVIDIA's projected mobile sales, you can see that the company is also expecting strong growth in its graphics card business as well.
2013 Estimated Sales
2013 vs. Trailing Growth Rate
|Companywide sales||$3.7 billion||$4.85 billion (midpoint)||31%|
|Consumer products (Tegra)||$410 billion||$1 billion||144%|
|Graphics cards (GPUs and high-end cards)||$3.3 billion||$3.85 billion||17%|
Sources: Company filings; Capital IQ, a division of Standard & Poor's.
A 17% growth rate in graphics cards might not look particularly impressive, but considering that NVIDIA's consumer graphics cards are often lumped in with the struggling PC industry, it's a pretty strong showing. NVIDIA's higher-end offerings have numerous tailwinds behind them but have also struggled to find a foothold. The segment has been stuck treading water the past five quarters as sales growth dried up.
Longer term, NVIDIA investors need to look at growth within the Chinese market. It gets quite a bit of media attention that NVIDIA is supplying high-end cards to the world's fastest supercomputer in China, but there's also a lot of action on the consumer side. China's PCs ship with a graphics card attach rate in the 80s, much higher than America's attach rate, which languishes in the 20s. With China being the world's largest PC market, NVIDIA's reliance on the emerging economic giant should only grow.
Tech News No. 2: Can Moore's Law continue?
Taiwan Semiconductor Manufacturing (NYS: TSM) , the giant of outsourced semiconductor manufacturing, is looking to begin testing prototypes using the extreme ultraviolet lithography (EUV) process in the coming weeks.
That technology might look complex and confusing -- and it is -- but the key point is that it could address a key concern in semiconductors. Investors and consumers have become acclimated to the concept of Moore's Law, an idea that roughly equates to the doubling of computing power every two years. That rate has been accomplished by continually shrinking transistors and placing more items on ever more powerful semiconductors throughout time. However, we're rapidly approaching the limits of current technology. Transistors are already down to the size where every atom counts.
EUV attempts to move chip-making forward by using a light much more precise than existing technologies. However, it's not without its downsides. Here's how ARM Holdings (NAS: ARMH) Executive Vice President Simon Segars explained the challenges facing EUV:
"To have a fab running economically," Segars said, "you need to build about two to three hundred wafers an hour. EUV machines today can do about five."
Taiwan Semi is also testing out other three other next-generation processes; the field of semiconductor design and manufacturing is at its most wide-open position in decades, and these changes could present opportunities for investors. For example, Intel's (NAS: INTC) new Tri-Gate technology is years ahead of similar development from peers like Advanced Micro Devices (NYS: AMD) . If Tri-Gate proves to be the game-changer Intel believes it will be, that could give the company a lasting advantage in servers and maybe even mobile devices. However, making investments in a technology that doesn't pan out or get continuing support from semiconductor equipment manufacturers also increases the likelihood of rapid changes -- and, thus, risk -- in the industry. If you're a semiconductor investor, paying close attention to these next-generation technologies could prove extremely valuable.
That's it for today's tech recap. To stay apprised, add any of the major companies mentioned here to our free My Watchlist service today:
- Add NVIDIA to My Watchlist.
- Add Taiwan Semiconductor Manufacturing to My Watchlist.
- Add Intel to My Watchlist.
- Add Broadcom to My Watchlist.
- Add ARM Holdings to My Watchlist.
At the time this article was published Eric Bleeker owns shares of NVIDIA. You can follow Eric on Twitter to see all of his technology and market commentary.The Motley Fool owns shares of Qualcomm and Intel and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Intel and NVIDIA, creating a diagonal call position in Intel, and writing puts in NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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