The Chip in Your Phone Could be a Good Investment: NVIDIA Corporation (NVDA), QUALCOMM, Inc. (QCOM), Broadcom Corporation (BRCM)

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NVIDIA Corporation (NASDAQ:NVDA)Computers, laptops, mobile phones, tablets, and now phablets.

The world of technology has been shifting hands. With devices becoming more compact, the onus lies on the microchip manufactures on how great a punch they can deliver in the smallest packages.

NVIDIA Corporation (NASDAQ:NVDA), a manufacturer of graphics chips for smartphones, PCs, and tablets, reported its earnings for Q4 2013, which met analysts’ expectations on revenue, and beat the consensus expectation on EPS.

The company reported revenue of $1.11 billion, 16% higher than prior-year quarter’s $953.2 million. GAAP earnings were $0.28 per share for Q4, 56% higher than the prior-year quarter’s $0.18 per share. Adjusted profit was $0.35 a share. The growth was on account of higher Tegra sales and its growing GPU business.

NVIDIA Corporation (NASDAQ:NVDA) claims that its ‘graphics processing unit’ market share has increased from 53% to 65%, and its notebooks market share has improved from 47% to 66%,compared to last year. NVIDIA’s new Kepler GPU architecture is the first design that comprises virtualization technology built right into the GPU. The introduction of the new design has helped in elevating market share and margins.

NVIDIA Corporation (NASDAQ:NVDA)’s Tegra processor’s sales increased 29% in fiscal 2013. Tegra 3 quad-core processors drive the world’s most popular devices, such as Google Inc (NASDAQ:GOOG)‘s Nexus 7, Microsoft’s Windows RT Surface tablet, Lenovo’s IdeaPad Yoga 11, and many more.

Moreover, NVIDIA Corporation (NASDAQ:NVDA) introduced the Tegra 4 processor, which is supposedly much better than its predecessor, Tegra 3. Tegra 4 is up to six times faster than Tegra 3, and is also LTE compatible. Currently, only QUALCOMM, Inc. (NASDAQ:QCOM) offers LTE-compatible chipsets, but NVIDIA, too, should penetrate the market once its Tegra 4 processor debuts.

The results and prospects no doubt look great, but currently a lot of rumors surround the company, like Google considering QUALCOMM, Inc. (NASDAQ:QCOM) over NVIDIA Corporation (NASDAQ:NVDA) for its next generation of Nexus tablets. These rumors, though, didn’t have any potential negative impact for the company.

NVIDIA Corporation (NASDAQ:NVDA) has a sturdy balance sheet with ample cash and no debt. The company has an annual yield of 2.43%, returning fair cash to its investors. It has been smart in the past, and made the right changes that have helped it perform and grow, such as moving into the high-end computing space with its Tesla Graphic Processing Units. I am positive about the company’s prospects.

Sheer winner

QUALCOMM, Inc. (NASDAQ:QCOM) dominates the chip manufacturing industry and is currently in a complete win-win situation, with its patent generating a smooth flow of cash. Its 3G network chips have a lot of potential, especially in emerging markets like India and China, where networks are now changing from 2G to 3G.

Furthermore, it has a first mover advantage in the 4G segment, since it is the only company that has a workable 4G solution. At present, barely 1% of all data traffic goes through 4G, but that proportion is expected to grow to 10% in the next five years. Qualcomm is going to benefit the most out of this growth, which should definitely improve its revenue and profit.

The company’s processor also has a good performance history. Windows’ premium phone, the Nokia Lumia 920, runs on Qualcomm’s Snapdragon dual-core processor. Qualcomm’s dominance in 4G LTE baseband hardware sales helped fuel manufacturers’ adoption of its Snapdragon S4 processors.

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