If there’s a tech stock that’s a value in plain sight, it’s NVIDIA Corporation (NASDAQ:NVDA) . For those of you unfamiliar with the name, it is a fabless semiconductor company founded in 1993 with the sole purpose of developing and selling dedicated “graphics processing units,” which are specialized pieces of silicon for processing 2D and 3D graphics. In the 90’s and early 2000’s, there were plenty of PC graphics card players, but NVIDIA emerged victorious with only one major competitor left standing — Advanced Micro Devices, Inc. (NYSE:AMD) (via its acquisition of ATI Technologies in 2006.)
ARM enables NVIDIA to participate in the future of computing
Times have changed, however, and leadership in discrete PC graphics cards isn’t enough to drive a growth story going forward. The good news is that the company’s graphical strengths play perfectly to where the computing market is headed: mobile systems-on-chip. In fact, this transition is the best thing that could have happened to the company. NVIDIA Corporation (NASDAQ:NVDA) had long sought to build its own PC microprocessors based on Intel Corporation (NASDAQ:INTC)’s X86 architecture, but couldn’t do so as Intel wouldn’t license it out.
Thanks to support for the ARM Holdings plc (ADR) (NASDAQ:ARMH) architecture on Google Inc (NASDAQ:GOOG)‘s Android platform (which is the largest mobile platform today), NVIDIA Corporation (NASDAQ:NVDA) can actually develop processors in this space (either based on off-the-shelf ARM cores or a custom, binary-compatible core) without incurring too much of a legal headache.
NVIDIA’s GPU technology is key differentiator
In addition, since integrated graphics is a key differentiator for this space, NVIDIA Corporation (NASDAQ:NVDA) can really leverage its years of expertise in building powerful, yet power-efficient, graphics processors for notebooks, desktops, and workstations. In fact, at SIGGRAPH (a premier graphics technology conference), NVIDIA demonstrated its next-generation “Logan” system-on-chip, which utilizes graphics technology borrowed and adapted from its higher-end desktop chips.
The power efficiency of this chip, although it’s still early, looks absolutely stunning on the graphics side of things. In fact, while QUALCOMM, Inc. (NASDAQ:QCOM) and Apple Inc. (NASDAQ:AAPL) have been leading the charge in mobile graphics performance, NVIDIA Corporation (NASDAQ:NVDA) seems bent on taking the unequivocal crown here. If it can do so in a reasonable power envelope, then it will give the company a real edge as it competes for design wins in a highly competitive (but very large) tablet market.
Icera helps NVIDIA push into smartphones
While the tablet opportunity is compelling, the smartphone is even larger. Interestingly, the space has been largely dominated by Qualcomm at the high end (thanks to its leadership in developing LTE baseband and RF solutions) and by numerous Asian players such as Spreadtrum Communications, Inc (ADR) (NASDAQ:SPRD), MediaTek, and Allwinner at the low end.