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Is the Street Writing NVIDIA Corporation (NVDA) Off?

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It’s hard to fault anyone for feeling a bit apprehensive about NVIDIA Corporation (NASDAQ:NVDA)‘s future. While this company still has a solid market position in graphics processor units, or GPUs, over rivals Advanced Micro Devices, Inc. (NYSE:AMD) and Intel Corporation (NASDAQ:INTC) , evidence suggests that this may not last. But it’s not for the reasons that you think.

For instance, in their respective quarterly performances, shipments of AMD GPU/CPUs dropped 15% year over year in the fourth quarter. By comparison, revenue from Intel’s PC client group was down 6% year over year and 1.5% sequentially. Meanwhile, NVIDIA’s desktop shipments spiked up 28.3% from the previous quarter, while mobile discrete shipments advanced 12%.

NVIDIA Corporation (NASDAQ:NVDA)Remarkably, in a down market, NVIDIA’s overall PC graphics shipments soared roughly 20%. This is while AMD struggled with weak microprocessor shipments that lead to a 37% year-over-year decline in revenue. Despite this outperformance by NVIDIA, the Street remains unimpressed. That the success of its business is heavily predicated on PC sales makes it hard to generate any sort of optimism. The fact is, PCs are still dying and NVIDIA understands this.

To that end, the company has been working hard to transform itself from just a legacy PC supplier to company entrenched in the new era of mobile devices. Unfortunately, the Street has not been buying this story. Bears argue that NVIDIA is too far behind the likes of QUALCOMM, Inc. (NASDAQ:QCOM). Though this might be true today, NVIDIA’s recent numbers suggest that this deficit is anything but insurmountable.

With fourth-quarter earnings due out Wednesday, the company will take the stage to explain to investors why they should believe in this story and why NVIDIA deserves more time. The company needs to build upon an impressive Q3, during which it beat both top and bottom line estimates, and culminate its fiscal year on a solid note.

Granted, NVIDIA’s third quarter wasn’t Qualcomm-esque, but it significantly outperformed Texas Instruments Incorporated (NASDAQ:TXN) , which is trading at a P/E ratio that is 7 points higher. Meanwhile, Texas Instruments is going through the same restructuring efforts as NVIDIA and trying to prove it can grow without mobile. However, its recent efforts have resulted in declining revenue for five consecutive quarters.

Nevertheless, despite sales arriving down 12% sequentially and 13% year over year, the Street believes in Texas Instruments. Conversely, NVIDIA is growing market share amid much doom and gloom, and the Street does not care. Fairly or unfairly, this is NVIDIA’s reality. And the company has done this as sales of its Tegra line of chips have seen increased demand, which was exactly what investors were apprehensive about.

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