With the explosion in gaming, media PCs and Apple (AAPL) computers, There is no better place to be than the high end graphics market. In their May 10th quarterly earnings report the CEO stated that the company's "strategy is clear and focused -- to be the world leader in GPUs and capitalize on this exciting opportunity." It must be exciting when you virtually OWN your market.
When it comes to high end graphics there are only two names in the business, ATI and Nvidia (NVDA). ATI (Nvidia's only competitor in the high performance GPU market) was recently bought by AMD in an attempt to compete against Intel in the server market. All AMD wanted was ATI's patent portfolio for virtualized graphics. Since servers don't have graphics cards, this was basically AMD's big move into the server market.
The big problem here is that AMD has cut ATI's R&D budget and is not focusing on its high end cards. The computer manufacturers noticed this and they are all fazing out ATI options.
The only two ATI cards available from Apple are the Radeon X1900 XT in the Mac Pros, and the ATI Radeon X1600 in the 17" iMacs. Take a look at Dell's notebook line and you will see only 2 of the 7 GPU options are ATI (The rest are Intel).
The only competition left for Nvidia is Intel (INTC). Intel has yet to get into the high end GPU market because it goes against everything they are trying to accomplish. Intel's goal is to get both the graphics and the processor on the same chip. This works for mobile and simple computers (like Mac Books), but when it comes to hi definition video and advanced gaming, it takes a serious card.
Rumor is that Intel is planning on coming out with a high end graphics chips. When that happens it could scare investors out of NVDA, but it will most likely not even dent NVIDIA's market share.
When researching Nvidia I was wondering where they stand in the mobile movement. I was surprised to find out that NVIDIA supplies the graphics chips for most of Motorola's phones including the RAZR.
The tie between Apple and NVIDIA is stronger than ever. Just look at the graphics card line ups for the new macs. You can not get arguably the best notebook of all time with an ATI card.
So who's side would you rather be on?
Numbers don't lie and I will use them to back up my thesis, NVDA is going higher. A 44% increase in profits this quarter, profit margins set an all time record of a whopping 45.4% and at the same time R&D increased by 29%. The icing on the cake was NVDA's reason for this boost in rev/profit/margins. "Nvidia 1Q Profit Surges 44 Percent on Strong Market Demand for GPUs."
This has been a good stock for a long time but here is why NOW is the time to buy. First, the trend reversal has been confirmed. The 50 day moving average has just crossed the 200. Second, this stock's PEG Ratio is only 1.18. Stocks are said to be "expensive" when the PEG gets closer to 2.0. The sell off in early January was justified because the stock moved 100% in 4 short months at the end of the year. The profit taking is over and investors love a monopoly.