Leveraging Nvidia’s (NASDAQ:NVDA) low cost Kai platform, Google (NASDAQ:GOOG) finally launched its first $199 quad-core Nexus 7 tablet Wednesday. The tablet runs on the latest version of Android, Jelly Bean, and is powered by Nvidia’s Tegra 3 processors. The 7-inch Nexus 7 tablet boasts of super-fast web browsing, high-quality gaming experience and flawless playback of HD movies and videos, providing premium experience at a reasonable price.

With smartphones and tablets slated to become the future engines of growth for the semiconductor industry and growing demand from developing markets fueling the overall industry growth, we feel that the $199 price tag along with superior graphics powered by Tegra 3 could take the market by storm.

Tegra 3 revenues increased by almost 50% in Q1 2012 and Nvidia expects the shipment to almost double in 2012. With the pace of design wins that the company has registered so far, it does not look like a far fetched target to us.

See Our Complete Analysis for Nvidia Here

Nvidia Could Benefit From Growth In Android and Windows RT

Research firm IDC, estimates that Android Operating System (OS) market share in worldwide media tablet shipment registered a little over 15% increase in 2011. Though it forecasts a slight decrease this year, it estimates the market share to be around 38% by 2016. With media tablet sales to end users believed to reach 110 million units this year and cross 220 million unit by 2016, there is huge potential for growth in the market. ^[1]

In addition to Google’s Android OS, the launch of Windows RT this year is expected to threaten the comfortable dominance that Apple’s (NASDAQ:AAPL) iPad currently enjoy in the tablet market. With Tegra 3 processors being present in Microsoft’s (NASDAQ:MSFT) Surface PC tablet as well, we feel the company will leverage from the growth in both these operating systems. (Read Our Article: Nvidia’s Tegra Processors To Power Microsoft’s New Surface Tablet)

Nvidia has been eying the lucrative tablet market as a way of challenging Qualcomm’s (NASDAQ:QCOM) growing smartphone dominance. We believe, that the company has been fairing well so far; and thus, stick to our estimate of Tegra related revenues crossing the $2 billion mark to become Nvidia’s most valuable segment by the end of our forecast period. (See Related Article: Tegra Could Become Nvidia’s Most Valuable Business)

We have a price estimate of $20.98 for Nvidia, a premium of around 60% to the current market price.

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1. IDC Increases Media Tablet Forecast, Expects New Products and Price Points To Drive Strong Shipment Growth Through 2016, IDC Press Release, June 14, 2012 [↩]