Current Trends That May Give NVIDIA Corporation (NVDA) Upside: Intel Corporation (INTC), Advanced Micro Devices, Inc. (AMD)

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NVIDIA Corporation (NASDAQ:NVDA) is an US based technology company which manufactures graphics processing units. Professional Graphics contributed approximately 22% to the overall revenue, while Discrete Desktop Graphics and Discrete Notebook Graphics contributed 34% and 19%, respectively. In an environment where several competitors such as Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NYSE:AMD) have reported negative earnings, NVIDIA Corporation (NASDAQ:NVDA) reported a 7% growth in profits and a slight increase in gross margin. Although PC sales did not witness any growth during 2012, revenue generated through non-PC products contributed heavily to the growth. While the company’s stock dropped by 15% last year, going forward I expect the following trends to drive the company’s valuation.


PC market might witness growth in 2013

The battered US economy that led to declining consumer spending and softness in the enterprise market resulted in a massive slump of demand for PCs. The cannibalization by substitutes like tablets and the transition in operating systems further added to the decline in sales. However, growing demand from emerging economies and the improving macro environment signals a possible revive in demand for PCs going forward. In addition, the new convertible and hybrid PCs are expected to drive demand.

In Millions 2009 2010 2011 2012 2013 2014 2015 2016
Total PC Sales 304.9 347.1 363.9 367.2 391.1 418.6 450.1 483.1
Desktop Sales 136.2 145.9 154.8 153 155.7 158.8 160.9 162
Notebook & Netbook Sales 168.7 201.2 209.1 214.2 235.4 259.9 289.2 321.1

Source: IDC Press Release

PC gaming could make the difference

The PC gaming market is expected to increase at a rapid rate in the next few years. During 2012, cloud gaming and multiplayer games drove the PC gaming market. As per the global revenue of multiplayer games reached the staggering $13 billion mark during 2012, which is reportedly a 21% growth rate from the previous year. Cloud gaming is a separate segment in online gaming, where game streaming can be directly on demand on a PC. NVIDIA Corporation (NASDAQ:NVDA) has six partners that offer cloud gaming to technology companies across the world, and it is further contemplating on adding new middleware partners.

Recently, NVIDIA Corporation (NASDAQ:NVDA) launched an Android based gaming console called the Project Shield. The portable console that can be connected to a PC was launched at the Consumer Electronic show earlier this year. Project Shield has the potential to draw some of the best games to Tegra Zone. Tegra Zone is an application that is supported by Android, and the application is rapidly gaining in popularity as it has been downloaded more than six million times already. The above listed factors should have a direct impact on the PC gaming market and will lead to a definite increase in GPU sales.

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