Nvidia Expands Offerings But Wimpy Economy Could Hurt Pricing

October 11th, 2011 by Trefis Team
-36.40%
Downside
146
Market
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Trefis
NVDA: NVIDIA logo
NVDA
NVIDIA

Nvidia (NASDAQ:NVDA) holds around 85.5% market share of the global professional graphics cards market and has seen its shipments grow in Q2 2011 despite weak economy.  Nvidia should however watch out for AMD (NYSE:AMD) which is steadily gaining market share. Intel (NASDAQ:INTC) has also started providing support for professional applications like 3D CAD and basic digital content creation (DCC) through its Xeon processors, something we discussed earlier in Competition Could Weigh on Nvidia’s Professional GPU Prices. If competitive pressures continue and the economy continues to suffer, this could have a negative impact on Nvidia’s professional graphics cards pricing.

Meanwhile, the company is keeping pace with new developments in tablets and mobile computing space. It introduced its Windows 8 Developer program last month for enabling application development and announced that all its major brands of GPUs including Quadro – its professional graphics processor brand – will support Windows 8. It has also improved video processing and input/output capability for its Quadro and Tesla GPUs which should create an uptick in demand for these GPUs.

See our complete analysis for Nvidia’s stock.

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Professional Graphics Hardware Market Grows, Although Slow

According to Jon Peddie Research, the professional graphics processor market grew around 5% sequentially in Q2 2011. Nvidia and AMD, which together account for most of the professional graphics market, shipped 1.25 million units (add-in cards and mobile GPUs) of which Nvidia’s accounted for 81% of the units sold, maintaining its dominant position. AMD on the other hand is making steady gains. It sold 18.5% of the total units for Q2 2011 which is more than double from its lows in mid-2008. [1]

Nvidia Introduces Windows Developer Program, Improves Video Processing Capability for GPUs

Last month Nvidia announced its Windows 8 Developer program that’ll enable developers in building apps for numerous ARM and x86-based devices and said that all its four major GPU brands (Tegra, GeForce, Quadro and Tesla) will support Microsoft’s Windows 8 operating system. Growing demand for Windows 8 and its compatibility with the majority of the platforms – PC, tablet and mobile – will aid in boosting Nvidia’s processors as well. [2]

The company recently launched Nvidia GPUDirect for Video for Quadro and Tesla chips, and the upgraded technology helps developers deliver better quality and more realistic on-air graphics and also enables faster image processing as the video input/output devices is directly synchronized with the GPUs. [3]

While we estimate Nvidia’s pro graphics card pricing will remain constant at around $178 during our forecast period, Trefis members expect an increase from $187.30 in 2012 to $210 during the same 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 50% above the current market price.

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Notes:
  1. Workstation market behaving as expected in the second quarter of 2011, JonPeddie Research, Sept 6, 2011 [↩]
  2. NVIDIA Helps Transform the PC With Windows 8 Developer Program, Press Release, Sept 13, 2011 [↩]
  3. NVIDIA Enables Dramatic New Video Processing and I/O Capability for Quadro and Tesla GPUs, Press Release, Sept 6, 2011 [↩]