Nvidia Corp: Leading Innovator In Graphics Microchips Field

NVIDIA Corp. (NVDA) is a company that seeks to win the game by constantly staying ahead of its competitors. One of the big three companies, along with Allegheny Technologies (ATI) and Intel Corp. (INTC) that sell highly advanced graphics microchips for computing applications of all types, NVIDIA is unique among them because it puts its primary focus on research and development -- even outsourcing production -- to make sure that in a world where technical advancement moves at the speed of light, it remains the most innovative of an innovative trio.

So while both Intel and ATI maintain a good competitive position against NVIDIA's GeForce chips in the desktop market -- although NVIDIA is still leading there too -- the company blows its competition away in other categories. For example, the company controls 60% of the market for notebook computers, makes the chip used in the new Playstation 3, and, in January of 2007, acquired a company that will make it easier to use its chips in a variety of handheld devices, including PDAs and smartphones. There are even applications for its products in unexpected fields, like industrial design, film production, and medical imaging.

Experts anticipate the graphics market expanding faster than the overall computing market, as customers expect products that offer better visuals than ever before, so there are a lot of growth opportunities here. Of course, graphics processors are a highly competitive market, and although the substantial R&D costs make it hard for anyone new to enter the field, there's still pressure from ATI, and to a smaller degree, from Intel, as they attempt to catch up. That said, Deutsche Bank thinks that NVIDIA's strengths, especially in the non-desktop sectors, make it a recommended buy, and I'm inclined to agree.

Type of Stock: NVIDIA Corporation is the worldwide leader in programmable graphics processor technologies.

Price Target: I agree with Deutsche Bank that has a price target on this one at $43 -- as it's currently trading in the upper-$30s, I'd buy now.

Comments

[ToranagaSama:]

I'm just wondering if Ms. Kramer has any idea about which she speaks. As it would seem she is COMPLETELY clueless in regard to the graphic card industry.

Ahhhh, Allegheny Industries Profile:
Allegheny Technologies Incorporated, through its subsidiaries, engages in the production and sale of specialty metals worldwide. It operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products.

ATI may now be Allegheny's ticker symbol, but ATI the graphic card maker has now been a subsidiary of AMD, the CPU maker, for a bit of time now. AMD acquired ATI Technologies in Q4 2006.

Anyone who would allow this woman to manage their money, would be foolish, let alone take her advice.

Mistake---HUGE mistake. Failing grade!

Her comments are just blatherings:

1) ati.amd.com/products/i...

2) Nvidia controls 22.8% of the mobile (notebook) market share (behind both Intel and AMD/ati) NOT 60%!! www.tgdaily.com/conten.../

3) Regarding the "Playstation 3", it is a failing gaming system. Costly to manufacture and, consequently, overpriced at its introduction, with no successful sales driving gaming software. In contrast, AMD/ati is the supplier of the XBox' graphic subset. The Xbox feeding off of over sales of 3 million units of the hit game "Halo" has sold over 500K console units in the last MONTH!

4) Regarding the "acquired company", why the heck didn't she give the company's name? Let me surmise, the company is PortalPlayer, which prior to its acquisition by Nvidia, had its stock drop 40% when Apple announced it would NOT be using PortalPlayer's chips in its revamped Ipods. So, in other words Nvidia bought PortalPlayer's technology on the cheap---speculating they could make *some* use of it. Nothing especially accretive to earnings here.

5) Lastly, Intel isn't trying to "catch up" to Nvidia. Intel leads the market with a 38% share to Nvidia's 33.9%

Kramer's positive note on Nvidia is correct in that Nvidia's has good momentum with Intel's market share having dropped 3.8 points. Though most of Nvidia's gains have been at the expense of AMD/ati whose share dropped 4.3% to a 19.1% share. Nvidia is indeed dominating the competition in the high-end gaming market.

So, is Nvidia a good bet, as Kramer suggests? My advice would be to do your own homework. AMD/ati will soon be introducing their next generation technology to combat Nvidia. These companies have a history of 'leap-frogging' one another's technology. So, soon it may be AMD/ati that'll be king-of-the-hill. Do your own homework and disregard the unsubstantiated blatherings of pumpers and dumpers!

2007 Nov 08 05:16 AM

[jcrash:]

Problem is, no one shops for an Intel "Card", they lead only because of OEM stuff. ATI? You obviously don't know how the general gamer population feels about ATI's driver history. As for AMD/ATI - the acquisition has made the graphics stuff low priority and it is suffering. There is only one high performance alternative, really.

2007 Nov 08 11:04 PM

[jcrash:]

Problem is, no one shops for an Intel "Card", they lead only because of OEM stuff. ATI? You obviously don't know how the general gamer population feels about ATI's driver history. As for AMD/ATI - the acquisition has made the graphics stuff low priority and it is suffering. There is only one high performance alternative, really.

2007 Nov 08 11:04 PM

[SgtSally:]

Toranaga Sama - Good points. I was thinking the same things myself - though in more diplomatic terms.
Introductory Paragraph reads like a company PR.
PlayStation has not been that successful.
PLAY = Apple's cast off
Graphic Cards = Highly competitive
Handset market = super competitive
INTC - graphics on chip for mobile coming.

2007 Nov 08 08:36 AM

[Stefan Wyler:]

Intel and AMD will blow away Nvidia in the long-term with Intel clearly leading the way.

2007 Dec 17 02:44 PM