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Nvidia Outperforms Following Positive Nintendo Switch Report

Nintendo is reportedly hiking its production target for the Switch, which is powered by an Nvidia processor, and also appears to be prepping a 4K-capable model for 2021.

Nvidia  (NVDA) - Get NVIDIA Corporation Report was among the standouts on a strong day for high-growth tech stocks following a positive report about major client Nintendo  (NTDOY) .

On Tuesday night, Bloomberg reported that Nintendo is now asking its contract manufacturers to make up to 30 million units of its Switch console this fiscal year, which ends in March 2021. The report comes a month after one stating Nintendo had upped its Switch production target for this fiscal year by 3 million to 25 million.

Also: Following multiple reports that Nintendo is prepping a next-gen Switch that will launch in 2021, Bloomberg reports hearing from several game developers that Nintendo “has asked them to make their games 4K-ready.” This suggests that (unlike the current Switch, which only supports 1080p-resolution gaming) the next-gen Switch will be able to render games at 4K.

Nvidia, whose Tegra X1 processor powers the Switch, rose 6.7% in Wednesday trading. This compares with a 2.7% gain for the Nasdaq and the Philadelphia Semiconductor Index.

Nintendo's stock rose 4.3% in over-the-counter trading in the U.S..

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Nvidia naturally benefits from higher Switch production via greater Tegra X1 shipments. In addition, the launch of a more powerful, 4K gaming-capable Switch in 2021 could involve the use of a more powerful (and costlier) Nvidia processor.

Amid a broader surge in gaming activity and spending, Switch demand has soared this year since COVID-19 lockdowns first took hold in the U.S. in March. Though supplies have improved somewhat lately, the console is still often sold out at major retailers, and unopened systems continue to sell for healthy premiums to their $299 MSRP on online marketplaces such as eBay  (EBAY) - Get eBay Inc. Report.

In August, Nintendo reported that its Switch shipments rose 167% annually during its June quarter to 5.68 million. Shipments of the standard Switch totaled 3.05 million, while shipments of the cheaper and easier-to-find Switch Lite totaled 2.62 million.

As Nintendo reportedly hikes Switch production again, Nvidia and its OEM partners are getting set to begin selling gaming graphics cards based on Nvidia’s recently-unveiled RTX 30 series GPUs. The GPUs are the first gaming products based on Nvidia’s Ampere GPU architecture, and (from all indications) deliver giant price/performance improvements relative to gaming GPUs based on Nvidia’s Turing architecture, which debuted in 2018.

Graphics cards based on Nvidia’s RTX 3080 GPU, which carries a $699 graphics card starting price, will be available on Sep. 17. The top-of-the-line RTX 3090, which has a graphics card starting price of $1,499, becomes available on Sep. 24. A relatively less powerful GPU known as the RTX 3070, which has a graphics card starting price of $499 and is promised to still outperform Nvidia's most powerful Turing gaming GPU, will arrive in October.