Seeking Alpha
Long/short equity, contrarian, independent research, tech
Profile| Send Message| ()  

At its press event today, Apple (AAPL) announced a whole host of new products, including a 4th generation iPad, the iPad Mini, a 13" retina MacBook Pro, and a refresh of its iMac desktop line of products. While Intel's (INTC) integrated graphics are now seemingly good enough to power Apple's 13" retina MacBook, the company decided to pair its new desktop offerings with an Nvidia (NVDA) "Kepler" based discrete graphics solution, as it currently does with its 15" retina MacBook Pro. What does this mean for the Nvidia investor?

Graphics - "Good Enough"?

In today's mainstream compute environment, the latest "Ivy Bridge" from Intel has excellent, power efficient computing power. Further, Intel has been more aggressively bulking up the integrated graphics muscle that comes built onto the CPU die in order to save OEMs the cost of an expensive discrete graphics chip.

Make no mistake: for the average user, the integrated solutions from Intel are decent and will continue to get better. This has led to a lot of fear, uncertainty, and doubt surrounding the discrete graphics space, and it seems to be widely believed that Intel's upcoming "Haswell" chip will drive graphics makers like Nvidia towards the "margins" of computing.

The fact is that the damage is already done. The mainstream users - the ones who only use their computers to surf Facebook (FB) or play "Angry Birds" - don't buy discrete add-in boards or buy more expensive notebooks with built in discrete graphics. The people buying the graphics chips are the gamers and the professionals who need as much graphical horsepower as they can get. Interestingly enough, though, Apple seems to be setting a precedent that could start to make the "need" for discrete graphics much more widespread.

Higher Resolution? More Graphics Power, Please!

Apple is really pushing aggressive display resolutions in its notebooks, tablets, and now its desktops. While integrated graphics is certainly capable of competently driving such high resolutions for basic web surfing, more advanced multi-media applications and games will want as much graphical horsepower and fast on-board graphics memory as possible.

The traditional Windows PC makers will have no choice but to follow suit - the real money's in the high end, high margin products, and the Dells (DELL) and the HPs (HPQ) of the world aren't going to let Apple have the high end all to itself. There will be a more widespread push to higher resolution displays on the desktop/all-in-one side of things, especially targeted towards the multimedia crowd. In order to ensure acceptable performance in graphically intense tasks, these OEMs will need to also hop onboard the discrete graphics train. The creativity that the PC OEMs are showing with the "Ultrabooks" in the fight against Apple is refreshing, and I expect this to extend to the all-in-one PC side of things.

Gaming - Actually A Big Deal

PC gaming has traditionally been a major advantage that the Windows ecosystem has had over the Mac one. Ironically, Apple tends to lead in the mobile gaming space with its iPhone and iPad. This is not by coincidence; Apple's chips usually feature more aggressive graphics designs than the competition in the Android space.

It seems that PC game developers are taking gaming on the Apple platform more seriously. Valve Software, developer of the leading "Steam" platform for PC games, released its highly acclaimed platform on the Mac just a few years ago. The games selection has vastly improved, and now playing modern games on the Mac is viable. In order to play these games at acceptable performance levels at the ultra-high resolution on the Mac, the graphics power needs to be there. Integrated solutions won't cut it.

Conclusion - Discrete GPU Ain't Dead Yet

For the mainstream user, the discrete GPU has been in decline for a while. However, as the traditional desktop/notebook PC space gravitates towards the high end as tablets/convertibles take over the lower end, it is likely that the higher end will need differentiating features. High end graphics performance is a pretty good one, and it seems that Nvidia is quite well poised to continue to take these opportunities to keep its core graphics business well-funded as it ramps its mobile "Tegra" efforts.

Source: Nvidia Wins Apple iMac Deal: Others Will Follow Apple