It’s no secret that the GPU space has been heating up. The Apple/Nvidia deal got the ball rolling and now Intel, Nvidia and AMD/ATI are in a fight to lock up design wins in the next generation (or two) of devices.
A few things are driving this including:
- More graphics processing needed in mobile Internet devices. Video and graphics are more important than crunching spreadsheets.
- Interfaces are becoming more complex. It’s been on the roadmap for 20 years or so but more game-like UI features will dominate the client going forward. Much as basic windowing systems took over back in the late 1980’s and 1990’s.
- Software libraries have made it easier to take advantage of the GPU for some more general purpose processing. This is both a top-down and bottom-up movement. The GPGPU idea is here to stay.
That Intel may be in the PS4 (if there is such a thing) could happen. The new Intel chip is positioned at the high end but most of the units, and possibly profits will be in the low to mid-range where Nvidia (with Tesla and Tegra) appears to be in a good position.
Nvidia as a company and the NVDA stock are in the midst of a huge transition from high-end, expensive add-in cards to chipsets and mobile solutions. We expect Nvidia to emerge as a leader in this category. It won’t come without any bumps although guidance already reflects a fairly steep falloff in their traditional business.
Our fairly conservative estimate for fair or "intrinsic value" comes to $15 which makes the stock attractive at these levels. Full details can be found in our recently published 5 page client report ($pdf) discussing the changing client architecture with implications for Intel, ARM and Nvidia.
[Disclosure: Research 2.0 has a long position in NVDA and ARM at the time of this writing.]
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