Will Nvidia Continue to Ride Chip Wave?
NEW YORK (
) --
Nvidia
(NVDA) - Get Report
is the largest graphics semiconductor company left, but even with the increase in popularity of tablets, smartphones and other mobile devices, questions are being asked about the company's long-term strategy.
Nvidia is trying to move away from being solely a graphics company, and build an ARM-based CPU chip to supplement their graphics processing unit (GPU). The company, like many chip makers, uses intellectual property from
ARM Holdings
(ARMH)
for the basis of their chips. Nvidia's project to build a computing chip is known as Project Denver, but so far Nvidia does not have products in the market.
|
Silicon heavyweight
Intel
(INTC) - Get Report
is also trying to muscle in on the graphics chip business, as it tries to implement its own low-end GPU into Ultraboks, which are expected to be a hot technology this year.
J.P. Morgan analyst Harlan Sur believes Intel and
AMD
(AMD) - Get Report
will get the majority of the design wins in Ultrabooks. "Any Ultrabooks that utilize a discrete GPU will likely be targeted for high-end niche users and represent relatively small volumes, in our view," he wrote, in a recent research report. "Given this backdrop, we think that Nvidia will be unable to participate meaningfully in the potential growth opportunity posed by Ultrabooks."
Some have even speculated on a marriage between Intel and Nvidia, but as long as Jen-Hsun Huang is still the CEO of Nvidia, investors should not expect it. "An Intel-Nvidia marriage would make a lot of sense, but there is a lot of animosity between the two companies," Ng said in the interview.
Nvidia's GPUs are used in tablets such as the
Amazon
(AMZN) - Get Report
Kindle Fire and higher-end computing, but the company
cut its revenue outlook in late January
, following the floods in Thailand. The floods pushed up prices of hard-disk drives, impacting PC makers' ability to add a GPU to their systems.
Nvidia said it now expects fourth-quarter revenue of $950 million, plus or minus 1%. Analysts polled by
Thomson Reuters
are forecasting earnings of 19 cents per share on $950.5 million in revenue for the quarter.
Morningstar analyst Andy Ng believes that the hard-drive issues stemming from the flooding will affect not only this quarter, but potentially 2012 as well. "Because hard-drive prices have gone up, it will hurt discrete graphic chips demand, and that's where Nvidia makes a lot of its money," he explained, over the phone. "The PC supply chain is still being disrupted, and PC makers are cutting back on production." Ng has a $15 fair value on the stock.
Nvidia shares have performed strongly this year, gaining 16.5%, according to Google Finance. The broader
Nasdaq
has gained 12.5% since the start of the year.
Interested in more on Nvidia? See TheStreet Ratings' report card for
this stock
.
Check out our new tech blog,
Tech Trends
.
--
Written by Chris Ciaccia in New York
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