Is Being King of Notebook Graphics Worth Anything to Nvidia?

I throw that out there as a general question.

As Eric Savitz has noted, computer graphics chip maker Nvidia’s (NVDA) star has been falling of late, with analysts trimming estimates and dropping ratings as observers conclude that sales of Microsoft’s (MSFT) Vista operating system may not be the catalyst for graphics chip sales some would hope.

Over the weekend, Jon Peddie Research released a report showing a dramatic increase in Nvidia’s share of dedicated chips for displaying graphics on notebook computers, rising from 53% to 59% of units sold, even as Advanced Micro Devices’ (AMD) share fell to 41% from 47%. Peddie’s comment is that wide-screen laptops for showing movies on a single battery charge are becoming more the norm, and that’s pushing the need for high-performance graphics chips, of which Nvidia seemed to have the better product. (Which is kinda odd, because Apple’s (AAPL) Macbook laptops, which some would point to as just such a multimedia laptop, all use either ATI chips from AMD or Intel’s (INTC) integrated graphics chipset.)

Still, Nvidia shares have declined 12% since late December to $32.45. So, with notebooks sales still outperforming desktop computer sales by a humongous margin (laptops units climbed 20% year-over-year in December, according to International Data Corp., versus 2% growth for desktops), what’s it mean to Nvidia to be increasingly king of the hill in notebook graphics chips?

A good summary of analysts’ outlook on Nvidia can be found on the Motley Fool here.

NVDA 1-yr chart