Competition Could Weigh on Nvidia’s Professional GPU Prices

September 15th, 2011 by Trefis Team
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The PC chipset market seems to be on a path to recovery. According to research by Jon Peddie, graphics shipments increased by 6.5% quarter-on-quarter in Q2 2011 driven by over 84 million PC shipments worldwide, an increase of 2.4% q-0-q. [1] This is good news for Nvidia (NASDAQ:NVDA), which has rather seen a drop in its 2010 professional graphics cards market share. However, growing demand for iPads and Android tablets and smartphones could taint PC sales directly impacting Nvidia’s pro graphics cards sales in the coming quarters. In addition, Nvidia also faces competition from AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) who are bringing in newer graphics products to the market, and this could continue to add pricing pressure on Nvidia’s products.

While we estimate Nvidia’s average selling price per professional graphics card will remain mostly at $178 levels over our forecast period, Trefis members expect the selling price will increase from $188 in 2012 to $208 by the end of our forecast period. The member estimates imply an upside of 5% to the Trefis price estimate for Nvidia’s stock.

We currently have a Trefis price estimate of $19.91 for nVIDIA’s stock, about 40% above the current market price.

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PC Sales Improve in Q2

Last quarter was a surprise for the PC chip market as the overall PC shipments increased significantly in comparison to previous years that saw declines in desktops and notebooks due to sales hikes in tablets and smartphones. While Intel’s overall graphics processor units (GPU) market share grew by 14.7%, AMD and Nvidia saw losses of 14.2% and 18.4%, respectively. [1]  Nvidia’s loss can mainly be attributed to its exit from the integrated graphics segment, but it still dominates the professional graphics market with a 85% share compared to a near 13% for AMD.

Intel, AMD Introduce New Graphics Products

While Nvidia’s Quadro maintains leadership in professional graphics space, AMD and Intel are soon catching up by introducing new products. Intel, which never had a significant presence in the professional graphics processor market, is now providing support for professional applications like 3D CAD and basic digital content creation (DCC) through its Xeon processors based on Sandybridge architecture. [2] AMD announced yesterday the launch of its FirePro SDI-Link and FirePro V7900 SDI professional graphics cards and what these intend to do is provide more flexibility for SDI input and output capabilities and improve real time communication. [3] Fierce competition among these three players will likely push down Nvidia’s average professional GPU prices in the future.

Our complete analysis for nVIDIA’s stock is here.

Notes:
  1. Q2 Surprise: Graphics Shipments up 6.3%; PC Shipments up 2.4% According to Latest Report, Jon Peddie Research, Aug 4, 2011 [↩] [↩]
  2. Intel Enters Professional Graphics Market, brightsideofnews, April 7, 2011 [↩]
  3. AMD launches new professional graphics cards, Fudzilla, Sept 14, 2011 [↩]