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Nvidia Games the System With Graphics Driving Growth and Margins

Stocks in this article: NVDA AMD

NEW YORK ( TheStreet) -- What's moving Nvidia's (NVDA)   stock and plumping up its margins? Its graphics business, which is the tech company's biggest segment and an important driver of revenue.

The graphic processor unit (GPU) segment has always been big for Nvidia, with the segment generating 84% of the total revenue in fiscal-year 2014. Nvidia has been leveraging its leadership position in the graphics market to capitalize on the market demand, thereby adding significant value to the overall top line.

Nvidia is starting its fiscal-year 2015 with 64% share of the PC discrete graphics market and 81% share of workstation graphics units, while Nvidia's Tesla GPUs are being deployed in pilot projects at 44% of all HPC sites globally. Its shares currently trade around $18, up 14% for the year to date.

Nvidia has established a strong presence in PC games thanks to its high-performance GeForce series GPUs and its strategy of not going after the bottom 70% of the entire computing market.

By concentrating on what it considers the most important area of the computer world, Nvidia reported a robust 50% year over year growth in GeForce, GTX, and GPU sales in the fourth quarter of fiscal year 2014. This strong growth had helped the company in registering 14% year over year growth in GPU segment revenue for the same period.

Continuing with its GPU strategy, the company recently released its update to "Kepler architecture" with the launch of "Maxwell" graphics architecture. This new graphic architecture will be used in the new Nvidia GeForce GTX? 750 Ti and GTX 750 GPUs. Maxwell architecture is the most efficient GPU architecture ever built, with a 2x Performance/watt increase along with 50% reduction in power consumption compared to its predecessor Kepler architecture.

The company has adopted a different approach in these new GPUs as it is providing the experience of the new Maxwell architecture in the mid-price range. These GPUs thus form the low end of Nvidia's 700 GPU series. The first Maxwell-based GPUs are modestly priced with GeForce GTX 750 available at a retail price of $119, 1GB GeForce GTX 750 Ti available at retail price of $139, and a 2GB GTX 750 Ti available at retail price of $149. 

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