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Nvidia Games the System With Graphics Driving Growth and Margins

Stocks in this article: NVDA AMD

Both these GPUs will help Nvidia regain lost market share from Advanced Micro Devices' (AMD) new R7 and R9 series Hawaii GPUs, which were added last year. The R7 and R9 series are based on AMD's graphics core next architecture and apply a top-to-bottom approach, with R9 targeting performance gamers and R7 targeting lower-budget value and mainstream customers. These new GPUs has helped AMD gain a presence in the PC graphics market as rival Nvidia was at that time still updating to Maxwell architecture. 

Nvidia had primary targeted its new Maxwell GPUs against AMD's R7 260X, but the recent introduction of AMD's R7 265 2GB graphics card at $149 and a reduction in price of R7 260X has heated up the competition. In comparison, NVIDIA GeForce GTX 750 Ti provides best-in-class performance along with lower power consumption than AMD Radeon R7 260X.

Nvidia's has just released its first series of GPUs on Maxwell architecture, and more products based on this graphics architecture can be expected soon. Despite the PC market's downward trend, PC gaming is expected to grow at a CAGR of 14.3% from 2012 to 2015.

In addition, other segments of the graphics market like high-performance computing (Tesla), workstation (Quadro), and newly introduced cloud gaming service, GRID, are also major growth drivers. Nvidia's Tesla GPUs have been dominant in the HPC with the company showcasing the world fastest graphics accelerator for supercomputing, the Tesla K40.

The company reported 20% year-over-year growth in sales of Tesla GPUs in the fourth quarter of fiscal-year 2014. Along with its partner and market leader in high-performance computing hardware, IBM , Nvidia's prospects in HPC look strong.

Apart from Tesla, Nvidia's GRID trials continue to grow at a robust rate of 46% quarter over quarter in the fourth quarter of fiscal-year 2014, and will start being reflected in the company's income statement soon.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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