Deal with HP Highlights Nvidia’s Dominance and Tesla’s Success

May 23rd, 2011 by Trefis Team
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NVDA: NVIDIA logo
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Hewlett-Packard (NYSE:HPQ) is going to build a new server that will contain up to 8 GPUs from Nvidia (NASDAQ:NVDA). [1] The server is aimed at the high performance computing market and will be using Nvidia’s Tesla GPU model. This illustrates Nvidia’s dominance in the professional GPU arena where its competitor AMD (NYSE:AMD) has very little presence.

A couple of points are worth mentioning here. First, professional GPUs continue to be the most valuable business for Nvidia, contributing about 37% to its stock value by our estimates. This is primarily due to Nvidia’s high share in this market (~87%).

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Second, the Tesla GPU model is getting tremendous adoption and this deal is just one of the many wins the product has recently bagged for Nvidia. The ramp up for Tesla has been fast and sales have picked up to an extent where even Quadro has fallen behind. [2] It seems that demand for high performance computing GPUs is healthy and should continue to aid Nvidia’s growth.

Our price estimate for Nvidia stands at $21.29, implying a premium to market price.

See our complete analysis for Nvidia’s stock here.

Notes:
  1. HP Pairs With Nvidia for New GPU Servers, GigaOm, May 17 2011 [↩]
  2. Nvidia’s analyst day presentations, Mar 8 2011 [↩]