Nvidia Looks to 3D PC Market for Growth

July 2nd, 2010 by Trefis Team
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Nvidia (NASDAQ:NVDA), which competes with AMD (NYSE: AMD) in the discrete graphics processing market, is trying to benefit from the growing popularity of 3D entertainment by promoting 3D PCs for mainstream usage.

As 3D PC sales grow, we see an opportunity for Nvidia to drive sales of its market-leading GeForce graphics processors cards, which constitute around 20% of  its stock value according to our estimate. Nvidia maintains that GeForce processors are well-suited to support high-quality 3D vision.

The small but growing 3D PC market will become increasingly crucial for Nvidia, which currently faces stiff competition from AMD in the discrete PC graphics business. Below we explain how Nvidia stands to benefit from consumer demand for 3D PCs.

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Nvidia leads in discrete PC graphics

Nvidia’s GeForce is the primary choice among gamers and PC users to run graphic-intensive applications. We estimate that Nvidia will capture around 65% of the discrete graphic card market in 2010. We expect Nvidia’s share to exceed 68% by the end of the Trefis forecast period.

AMD’s latest Radeon and upcoming Fusion pose threat to GeForce

AMD’s latest ATI Radeon cards are priced lower than GeForce processor cards but equal them in performance. Nvidia also faces a challenge from AMD’s much-hyped Fusion processors, which promise to make discrete graphics obsolete in PCs to a large extent.

Nvidia counts on demand for 3D entertainment to maintain its PC graphic sales

The increasing popularity of 3D movies such as Avatar and Alice in Wonderland is spurring demand for 3D PC content in the form of movies, videos, and games. The 3D PC market is currently embryonic. But Jon Peddie Research, a consulting and market research firm that focuses on the graphics industry, expects annual 3D PC sales to grow exponentially, reaching 75 million units by 2014. Nvidia is partnering with Asus, Cyberlink, Dell (NASDAQ:DELL), Microsoft (NASDAQ:MSFT),  Sony (NYSE: SNE) and Toshiba, along with various PC game developers and media companies, to create immersive 3D experiences on the PC.

Nvidia has programmed GeForce GPUs to support 3D vision. The company also provides a 3D Vision kit that aids 3D image viewing. We believe GeForce cards will become an integral part of the 3D PC structure in the future. Strong adoption of 3D PCs will drive sales of Nvidia’s discrete graphics processors, thus defending the company from AMD’s onslaught.

You can see the complete $13 Trefis Price estimate for Nvidia’s stock here.