NVIDIA Corporation (NVDA): A Strategic Shift For This Tech Company

The resilient PC

Although the PC market is declining with many people choosing tablets over traditional form factors NVIDIA’s core business, the GPU, is thriving. In Q1 revenue for the GPU business actually grew by 8% even as PC sales declined. How is this possible? Because NVIDIA’s piece of the PC market is likely not shrinking at all.

The types of people choosing tablets over laptops or desktops use computers mainly to browse the Internet. In their case, tablets make perfect sense. But a PC gamer with a high-end graphics card isn’t going to switch to a tablet. There’s a big difference between playing Company of Heroes 2 on a gaming PC and playing Angry Birds on a tablet. While the broad PC market is in decline the part of the market that NVIDIA cares about could very well be growing. Regardless of how far technology advances a discrete PC graphics card will always be more powerful than what can be shoved into a tablet form factor.

Earlier this year NVIDIA Corporation (NASDAQ:NVDA) released the GTX Titan, a $1,000 discrete graphics card aimed at extreme gamers. Even the company was surprised by how well it sold, and the card greatly exceeded expectations. Demand for these high end cards exists and is apparently stronger than ever.

The bottom line

NVIDIA can only benefit from licensing its technology. The company has a strong core business, and Tegra’s slow roll out can be offset by a new stream of licensing revenue. If popular tablets like the iPad start having NVIDIA technology inside then the company could greatly broaden its reach into the mobile market. NVIDIA is the premier graphics company, and this decision to license its technology is a good move.

The article A Strategic Shift For This Tech Company originally appeared on Fool.com and is written by Timothy Green.

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