In line with the launch of Microsoft’s (NASDAQ:MSFT) Windows 8 release preview, Nvidia (NASDAQ:NVDA) announced the compatibility of its new drivers with the Windows 8 operating system (OS) early this week. The acquisition of patents from IPWireless, the introduction of its Kai platform, rumors of its graphic chips being present in the next generation MacBook Pro, LTE Icera chips approval to run on the 4G AT&T network – Nvidia seems to be on a roll this month. With its yet to be launched R302 drivers receiving the Windows 8 certification, Nvidia makes it loud and clear that it stays determined to keep pace with the changing trends.
Windows 8 Could Incite the PC Market
Last year, we witnessed a sagging PC market mainly on account of the hard disk drive shortage coupled with a slowdown in economic growth. As opposed to the meager 1.8% growth in PC shipments in 2011, Gartner predicts the current year to give some respite with an anticipated growth rate of 4.4%.  According to our current estimates, the PC sales (excluding netbooks) will grow at 4.7% for 2012.
Though the figure does not look very encouraging, many PC manufacturers are of the view that the much awaited launch of Microsoft’s new OS in October, supported by a rise in ultrabooks and other ultra-thin notebooks could revive the lethargic PC market. Thus, we are of the view that we could see a significant boost in PC shipments starting in the latter part of the year.
After the first preview release in September 2011, Microsoft took its last big stride before releasing the overhaul of its Windows OS, which in turn could change how almost all devices running it work. With the Windows 8 release preview unveiled and available for download starting this week, companies are hustling to make their products compatible with the same.
With the new version being compatible with touchscreen technology, Windows 8 will be a radical re-imaging of Microsoft’s core products and could turn out to be the next big thing in the industry.
Nvidia Announces Driver Support For Windows 8 Release Preview
Almost in concurrence with its Windows 8 release preview, Nvidia received the Windows 8 certification for its new R302 graphic drivers. Nvidia claims that it started the in-house development support for Windows 8 more than two years ago. It’s Windows 8 beta drivers have been available since March and the company expects to release the Windows Hardware Quality labs (WHQL) certified drivers for Windows 8 in the next couple of days. 
WHQL is a quality assurance certification that Microsoft requires from all PCs and final drivers before they are released. Nvidia has three WHQL labs that allow it to certify Windows desktops, notebooks and tablets themselves, saving PC manufacturers considerable time. In 2011, the company obtained more than 1,000 WHQL certifications, including systems that test and evaluate hardware and software on a daily basis. 
The Windows 8 drivers will support all the features in the new Windows display driver model, in addition to supporting the company’s 3D Vision and 3D TV play products. The WHQL certification of the drivers underscores the fact that Nvidia is in line with Microsoft and fully prepared for the Windows 8 launch.
What This Could Mean For Nvidia
The discrete desktops and notebook divisions contribute close to 33% to our price estimate for Nvidia, and we estimate the much awaited entry of the company in the PC microprocessor market to contribute close to 5% to the same. In the recent past, the discrete graphics division of Nvidia has faced an increased threat with the launch of Intel (NASDAQ:INTC) and AMD’s (NYSE:AMD) Sandy Bridge and Llano APU processors, respectively.
However, some PC buyers still prefer to have a discrete GPU and not completely rely on graphics capability of Sandy Bridge and Llano APUs. The fact that Nvidia recently won several design deals for Intel’s Ivy Bridge platform scheduled for 2013 also send a positive signal. Additionally, its GeForce R302 drivers being Windows 8 WHQL certified adds to our belief of the company retaining its market share in both notebooks and desktops , throughout our forecast period.
You can alter the market share in the graphs above to study how a deviation from our estimate will impact our current valuation for the company.
Our price estimate of $20.98 stands at a premium of 70% to the current market price.Notes: