Jon Smirl

Semis' Downturn - Which Companies Will Survive, Part 2

Nvidia has a long term strategic problem which is going to be fatal unless they can come up with a miracle. The integration of GPU/CPU by Intel and AMD is going to alter the PC graphics market such that Nvidia can't easily access it.

AMD's ATI is also showing a lot of smarts. ATI is licensing their GPU design to ARM chip manufacturers. That will shut off another outlet for Nvidia.

Nvidia may have a couple more profitable years, but it is dead in the long run if it can't come up with a solution for this trend.

This is Moore's law at work. Each year Intel/AMD get more and more transistors to play with. That means that all of the chips around the CPU will get integrated into the CPU sooner or later. Remember the floating point coprocessor? It's pretty much extinct. GPU is on the same path.

Besides, it is way inefficient for GPU memory to be off on the PCIe bus, it belongs over on the main memory bus. Integrated GPUs will be better than the current standalone ones when this process reaches completion.

GPU Wars: Attack of the $200-300 GPUs

Long run Nvidia is toast. The new integrated GPU/CPU combos under design at Intel/AMD are going to destroy the low and middle cost GPU market. Nvidia could still dominate the high end but it will be a much smaller company. Over time the GPU/CPU combos will move towards the high end.

There have been rumors of Nvidia buying an x86 CPU design in order to compete with the integrated GPU/CPU but there is no confirmation that they have bought one.

NVIDIA's Long-Term Prospects Mean It's Currently Undervalued

The GPU threats to Nvidia from Intel and AMD haven't shipped yet. They are a fundamental change in the way GPUs are constructed and are difficult for Nvidia to respond to. Intel/AMD are going to hurt Nvidia badly when these chips ship. Nvidia will probably be forced to respond by entering the x86 CPU market. Nvidia is at their peak revenue right now, the future is going to be much more difficult.

A simplistic way to look at this is that we are switching from add-in graphics cards to GPUs that plug into CPU sockets. Intel and AMD control those sockets and they're making their own chips. Competing against bundled GPU/CPU SKUs from Intel/AMD is a tough nut to crack.

This change is the reason why AMD bought ATI. Intel decided Nvidia was too expensive and designed the chips in-house. Nvidia is left without a partner.