Nvidia Launches Kepler GPUs That Challenge AMD

March 23rd, 2012 by Trefis Team
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Trefis
NVDA: NVIDIA logo
NVDA
NVIDIA

Nvidia (NASDAQ:NVDA) has launched two new graphics cards (GPUs), GeForce GTX 680 for desktops and GeForce GT 640M for notebooks, based on its next generation Kepler architecture. [1] We estimate that discrete desktop GPU and discrete notebook GPU businesses constitute roughly 18% and 15% to Nvidia’s value, respectively.

Since the discrete PC business is roughly one-third of the estimated Trefis value for Nvidia, the company will look to extend its technology lead over AMD (NYSE:AMD) and strike more partnerships with PC makers to include its discrete graphics cards, especially in Intel’s (NASDAQ:INTC) processor-based computers.

See our complete analysis for Nvidia

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According to some benchmark reports, Nvidia’s new GPUs outperform AMD’s new Radeon HD 7970 on several benchmarks by a notable margin. [2] Nvidia’s new GPU is based on 28nm process and has certainly given the performance crown to the company. But what matters is the value impact of this launch.

The pricing is similar to the previous generation GPUs, implying that the average pricing may stay stable over the long term as Nvidia will look to undercut AMD to gain share. This means that the price increases may be absent despite an improvement in performance of subsequent GPUs.

However, this is Nvidia’s best product and a major portion of its business is determined by how the bulk of its GPUs stack up against AMD. Assuming that the company replicates its performance lead in other GPU models as well, there is a possibility that it might gain some additional market share ahead of what we currently forecast.

Under an optimistic scenario where Nvidia can rise to and maintain a 70% share in both desktop and notebook discrete GPU markets, there can be further upside of about 10% to our current price estimate. Our price estimate for Nvidia stands at $21.26, implying a premium of about 40% to the market price.

Overall we believe that the shareholders are undervaluing Nvidia, and the company can unlock more value with its consistent push in discrete GPU market, Tegra-related revenue growth and potential inroads in PC microprocessor market in the future.

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Notes:
  1. NVIDIA Launches First GeForce GPUs Based on Next-Generation Kepler Architecture, Nvidia Press Release, Mar 22 2012 [↩]
  2. With GeForce GTX 680, Nvidia snatches desktop graphics card crown back from AMD, PC Magazine, Mar 23 2012 [↩]