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On Monday, Microsoft (MSFT) unveiled two new Surface PC tablets running on its Windows 8 operating system (OS). While one model will be powered by a third generation Intel Ivy Bridge processor, the other will be running an ARM chipset featuring Windows RT. Though Microsoft did not disclose which ARM-based processor powered the tablet, Nvidia (NVDA) has confirmed that its Tegra chips will be running one of the two Surface PC tablets launched by the company.

Nvidia has been eying the lucrative tablet market as a way of challenging Qualcomm's (QCOM) growing smartphone dominance. Last month, it introduced its Kai platform specifically designed to bring down prices of Android tablets, and more recently the company unveiled the world's first Windows RT tablet, powered by its Tegra 3 quad-core processors - Nvidia Takes On The Mobile Market With World's First Windows RT Device. With its processors featuring in Microsoft's Surface Windows RT, the company has scored yet another point against competitors such as Qualcomm and Texas Instrument (TXN).

Windows RT To Challenge Apple's Dominance In The Tablet Market

Windows RT is a version of Windows 8 OS for ARM based devices such as tablets and the major ARM based players that are expected to be part of this new OS are Nvidia, Qualcomm and Texas Instruments, amongst others. In addition to Google's (GOOG) Android OS, the launch of Windows RT this year is expected to threaten the comfortable dominance that Apple's (AAPL) iPad currently enjoy in the tablet market.

According to research firm Gartner, tablet sales to end users will register a 98% increase totaling close to 120 million units this year and with growing popularity the total sales could cross the 350 million units mark by 2016. With the slated growth in this segment, almost all players along the supply chain - from the chip makers to the device manufacturers - are vying to get a share of the lucrative tablet market.

Nvidia Vs Other ARM Chip Makers In Windows RT Ecosystem

Amongst the various chip makers working in tandem with device manufacturers to ready Windows RT products, Nvidia with its quad-core Tegra processors seems to be in the lead so far. It was the only chip maker to showcase a production ready Windows RT tablet with Asus at Computex 2012. However, showcasing its reference design tablet based on the dual-core Snapdragon line of processors, Qualcomm looks determined to challenge Nvidia and retain its dominance in mobile computing.

Texas Instruments does not seem to be too far behind either, with the company showcasing Windows RT on its OMAP processors based system at Computex 2012. Though the tablet is still work-in-progress, the company is confident that it will be ready with its hardware running on Windows 8 by the time the new OS is officially launched in the market - Windows RT Compatibility & Miracast Certification To Enhance TI's Connectivity Solutions.

With Tegra 3 revenues increasing by almost 50% in Q1 2012, Nvidia has been going strong so far in the mobile chip segment. It expects shipment to almost double in 2012 and so far it appears to be on track with the goal.

We have a price estimate of $21.08 for Nvidia, a premium of around 70% to the current market price.

Disclosure: No positions.

Source: Nvidia's Tegra Processors To Power Microsoft's New Surface PC Tablet