NVIDIA (NASDAQ:NVDA) is a well-known player in the computing industry with its graphics processing units that are used across a variety of applications. Thus, it makes sense to put the company through a SWOT analysis and weigh the pros against the cons.
- Product mix: It is the biggest weapon in NVIDIA’s arsenal. The manufacturer of graphics processing units (GPUs) for PCs shifted its attention to the mobile computing boom seamlessly and this has certainly increased its addressable market.
- Innovation: Another trademark of the NVIDIA brand. The company never sits back after designing a chip and comes up with a more efficient design pretty soon after. This quality has helped NVIDIA provide better solutions to customers, retaining existing ones and adding more in the process.
- Absence of a top selling device: The Tegra mobile chips which NVIDIA manufactures have not found their way into a bestseller like the iPhone. And as far as tablets are concerned, they power mostly Android-based devices which are yet to gather steam.
- Warning! GuruFocus has detected 4 Warning Signs with NVDA. Click here to check it out.
- NVDA 15-Year Financial Data
- The intrinsic value of NVDA
- Peter Lynch Chart of NVDA
- GPU has some fuel left: PCs might be on the decline but they still find takers in emerging markets such as China (the largest PC market) and India. There is tremendous room for growth in these markets as people are still crazy about adding a more powerful graphics card in their machine. Again, the company provides solutions for enterprise computing such as in supercomputers across industries. This is again an area where NVIDIA leads the charge.
- More from mobile: Barring a setback in the previous quarter, the Tegra chips have been doing pretty well. There are a lot of possibilities in the smartphone and tablet space and if NVIDIA gets it right here, it could turn out to be a winner.
- GPU slowdown: The GPU business, which makes up half of the company’s revenue, experienced some hiccups in the previous quarter. The Thailand floods impacted this business and its effects could be felt in the coming quarters. Again, low demand of PCs because of the advent of mobile devices will probably hurt NVIDIA’s core business.
- Competition: A number of companies such as Texas Instruments, Qualcomm and Samsung ply their trade in the mobile chip market. Qualcomm leads the space and its Snapdragon processor is the chip of choice for Windows Phone devices. Moreover, business from existing customer Samsung is expected to be low as it is now more of a competitor.
- Tegra powers a few smartphones and tablets but is nowhere close to Qualcomm. One of the biggest disappointments for NVIDIA, however, has been the lukewarm response to Windows Surface RT Tablets. Qualcomm also replaced NVIDIA in the second iteration of the Nexus tablet.
- NVIDIA was also beaten up badly by Qualcomm since Tegra it didn’t possess a LTE modem, but now that it has one, it could be an advantage for the company. But Qualcomm has already extended its lead in this market and could leave NVIDIA behind in the long run as well.
The way I see it, NVIDIA has a lot of potential to unlock going ahead. NVIDIA will find it difficult to push its Tegra line in the wake of stiff competition from Qualcomm. The company is trying its best to deliver the best, but is handicapped by the lack of a best-selling device in its repertoire. NVIDIA has a number of other positives to look forward to, but only time will tell if they are worthwhile.