Nvidia Dual Core Tegra 2 Chips to Ride Mobile Revolution with Android

January 24th, 2011 by Trefis Team
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Nvidia (NASDAQ:NVDA) competes with AMD (NYSE:AMD) and Intel (NASDAQ:INTC) in the graphics business. The company also competes in mobile processors with Intel’s Atom and is now planning to enter PC CPU business as well. The announcement of Project Denver was one of the more significant announcements from Nvidia, however another key announcement was the introduction of the next generation mobile computing chip Tegra 2.

Our current forecasts does not include this new development, and we await the company’s earnings release to update our forecasts.

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We have written an article previously (Android Market May Decide Fate of Nvidia’s Tegra 2 Chip) where we discuss how the tie up with android may help Nvidia’s Tegra 2 chips to reap success. While android has been gaining in popularity, the superior processing power of Tegra 2 dual-core may set standards of performance in the mobile market and challenge leaders like Apple (NASDAQ:AAPL). Apple has set the smartphone trend with its introduction of iPhone and now the tablet trend with its iPad. These devices are powered by A4 processor but Nvidia’s chip may create further demand for android devices, thereby challenging Apple.

The Adoption of Tegra 2

It looks like Nvidia’s new chip is likely to gain higher adoption on the grounds of its performance as well as link to the android operating system. The company announced the arrival of super phones that will be powered by its chip.

For example, LG Optimus will be one of the first super phones that will offer capability of recording and playing 1080p HD video. With dual-core processor, the performance will be much faster and these super phones are likely to evolve to the direction of mini computers, with voice calling being used as secondary feature. One analyst estimated that the new chip will add over $400 million in high margin sales to Nvidia in 2011. [1]

Tablets will from LG and Dell will also use Nvidia’s new chip, which will boost its mobile chip revenues. Below you can see how higher revenues can lift price estimate. It seems that given the recent stock run, Investors may be expecting quite high revenue and margin gains.

You can see the complete $13.43 Trefis price estimate for Nvidia’s stock here.

Notes:
  1. Nvidia shares rise on analyst upgrade, Yahoo Finance, Jan 5 2011 [↩]