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Nvidia Is to Intel What Salesforce Is to Oracle

And in this case, Nvidia is driving such a crest of "creative destruction" forward against the Intels of this world, starting right now and for the next three years.

2. The Tegra mobile processors.

The second, and thus far smaller part of Nvidia's business, is a lot tougher than the industrial graphics processor business. It's also a larger market, with a potential to sell over a billion units per year.

The dominant incumbent in this space is Qualcomm (QCOM). It rose to this position by leveraging its dominant position in cellular modems into executing a new mobile CPU platform very well.

Two of the industry's leading players -- Apple and Samsung -- make their own CPUs, but also pair them with Qualcomm's stand-alone cellular modems. Nvidia certainly has its work cut out for itself here, and victory is by no means certain.

Nvidia's challenge right now is to do the opposite of what Qualcomm did in the past few years: Add a competitive cellular modem to its CPU/GPU. This may have been an almost-impossible task only a couple of years ago, but an opening has now presented itself in the marketplace for Nvidia: LTE on lower frequencies.

The industry is now standardizing on LTE, and more lower frequencies, such as 700 MHz in the U.S., have now been made available. This means Qualcomm's expertise in legacy technologies used by companies such as Verizon (VZ) and Sprint (S), is disappearing in importance.

Obviously, Qualcomm will continue to be a leading vendor in the new low-frequency LTE world as well, but over the next year or two pricing should collapse, and probably margins too -- for Qualcomm. Essentially, the Qualcomm monopoly will be no more, starting this year.

Just like Qualcomm executed so well in adding its Snapdragon CPU to its cellular modem, Nvidia must now execute similarly well in adding a cellular modem to its Tegra CPU. Over the past three years, Nvidia has stumbled many times in just making its Tegra CPU competitive, and the cellular modem is arguably an even bigger challenge. There is no shortage of legitimate doubts as to whether Nvidia will be able to pull this off.

In addition, other new competitors are also using the same opening to enter this market: Broadcom (BRCM) and Intel (INTC - Get Report) are the most prominent.

The good news for Nvidia's Tegra opportunity is that it's so large. Even if Nvidia fails to dethrone Qualcomm, and even if Intel and Broadcom match or overtake Nvidia's Tegra, this could still be a thriving business with a No. 4 market position, and right now Nvidia is gunning for the No. 2 position.

Icing on the cake: Nvidia's SHIELD gaming device.

Marrying the two sides of Nvidia's business is the SHIELD gaming device, which should go on sale in late June for somewhere under $500. It marries a gaming-optimized Android handset, with the possibility to connect to Nvidia's future cloud-gaming services. It already looks to become an iconic product in the gaming community.

Bottom line: Is Nvidia to Intel what is to Oracle? Will the cloud take over powerful computing? If the answer to this question is yes, Nvidia may be in the catbird seat as it completes its transformation over the next three years.

-- Written by Anton Wahlman in Palo Alto, Calif.

At the time of publication, the author was long AAPL, GOOG, QCOM, NVDA, INTC and BRCM, and short MSFT and AMD.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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