Nvidia’s Tegra 2 Highlighted at Computex
In Computex trade show that concluded recently in Taiwan, Nvidia (NASDAQ:NVDA) highlighted the success that it has been having with its Tegra 2 processors. This is helping the company in competing against players like Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN) along with relatively newer players like Intel (NASDAQ:INTC). Nvidia stated that the demand for its chips has increased amongst tablet PC makers and total unit shipments are estimated to be about 10 million in first half of 2011. [1] In addition to this, the company is likely to bring quad core version of Tegra next year to the market.
The company’s management is betting that tablets will overturn the consumer PC market and is not discarding the possibility of Tegra processors surpassing GPU business in few years. [1] If this happens, there could be material upside to Nvidia despite the fact that the growth in tablets will cannibalize PC sales and thus Nvidia’s GPU sales.
The upside will come from tremendous growth in revenues from mobile chips alongside faster improvement in mobile chip margins. As GPU sales contribute just about 20% to Nvidia’s stock according to our estimates, we don’t expect a shift to tablets to negatively impact Nvidia’s value. Professional GPUs account for about 34% and we don’t expect these to be affected.
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Our price estimate for Nvidia’s stock stands at $21.25, which is around 25% ahead of the current market price.
See our complete analysis for Nvidia
Notes:- Computex 2011: Nvidia CEO expects smart devices to outperform PCs after five years, DigiTimes, May 31 2011 [↩] [↩]