Chris Lau, Kapitall: Bloomberg reported that Qualcomm (QCOM) and NVIDIA (NVDA) could power the refreshed Microsoft (MSFT) Surface RT tablet. This comes at a time when the future of the RT is uncertain, but it creates upside for the two chip suppliers. [Read more from Kapitall: Ken Fisher Owns These 7 Undervalued Stocks With Rising Profits - Should You?] If the Wi-Fi only tablet is powered by the NVIDIA Tegra chip, it gives NVIDIA the opportunity to be the standard for graphics and mobile gaming. The company would earn royalties, and would strengthen its relationship with the developer community. For the 3G/4G RT models, Microsoft may use the Qualcomm Snapdragon processors for the newer Surface models RT Market Share Small Microsoft has less than 1% of the tablet market share, so NVIDIA and Qualcomm may not be big beneficiaries as suppliers. Microsoft recently began giving a free touch or type cover for each Surface RT sale. Still, Microsoft does not appear to be backing down on pushing RT to the market. Risks If Microsoft decides to wind down the Surface RT to focus on the Surface Pro, there are still benefits for NVIDIA and Qualcomm. Microsoft could choose these companies to develop the chips for the more expensive tablet. Even though Apple still dominates the tablet space with 40% of the market, Microsoft recognizes that building its user base will take time. Ultimately, the success of the Windows tablet will depend on developer support. Without software development on the platform, the Surface line will fail. Share Performance [Analyze These Ideas: Access a performance overview for all stocks in the list] Surface Pro Mispriced The Pro version of the tablet could give Microsoft more market share, but the high starting price ( at $899) will deter many buyers. A 128GB Surface Pro tablet costs $999, compared to $929.99 for an Apple iPad. Conclusion The refresh in the RT will be moderately beneficial for the chip suppliers, but it will not act as a strong catalyst for them. Until Microsoft lowers the price of both the Surface RT and Surface Pro, sales will remain weak. Catchy commercials might help sales, but it will hurt profit margins considerably. Competitors will continue to dominate the tablet space because of greater app availability and deeper familiarity by consumers. There is still hope. In the smartphone space, Windows Phone 8 will continue to grow in popularity. Microsoft just needs to offer an affordable tablet solution that complements the mobile experience.
Written by Chris Lau, Kapitall Contributor