Various researches show that global games market will soar past the $100 billion mark in the next three years to reach $102.9 Billion by 2017. This represents a compound annual growth rate (CAGR) of +8.1%, surpassing the previous year’s estimate due to the persistent growth of both Asian markets and mobile gaming. The market for smart phones and tablets will rise from $17.6billion (a total market share of 23% in 2013) to an impressive $35.4bn in 2017 – ultimately dominating one third of the global games market. This growth is benefitting various chip manufacturers, and NVDIA(NASDAQ:NVDA) is one such manufacturers that is set to reap the benefit from this growth market.
NVIDIA, recently released its first quarter financial reports which have impressed the investors. Its revenue was $1.1 billion, up 16% year-on-year. EPS was up 85% year-on-year driven by the stupendous performance of PC gaming supported by growth in Tesla, Quadro GRID, and in Tegra.
- 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
Desktop and notebook PC gaming delivered outstanding year-over-year growth as gamers continued to buy high-end GPUs to play their latest PC games. GPU business of the Company grew by 14% year-over-year to $898 million. High end GeForce GTX GPUs for desktop and notebooks also grew 57%, courtesy demand for gaming GPUs has been constantly increasing and the newly released GeForce GTX 750 series.
Tegra showed its third consecutive quarter of growth powered by strength in automotive. Recently, Audi launched its Tegra-powered A3 in the U.S. this quarter. This is now a fast moving inventory of finished products for the Company. The company is already also focused on Jetson TK1, a development platform aimed at automotive, embedded and robotics applications.
Notebook gaming has grown 51% CAGR for the past three years. Building on gaming notebook momentum, the Company also launched a new family of notebook gaming GPUs, including the first based on the Maxwell architecture. The performance, battery life, and thin form factors of these notebooks have built a great deal of excitement in the end market. These newly released products are in shipment and will be also be available to every major OEM by end of the current quarter. The Company’s workstation business is also gaining momentum as it recorded a solid quarter that goes on to record highest market share level since 2010.
Synergies to boost future growth
Recently, IBM (IBM) announced that it plans to incorporate NVLink interconnect technology in its future POWER8 CPUs. The POWER CPU is poised to become a mainstream CPU through the OpenPOWER Foundation. Through the Foundation, IBM has opened up POWER as a licensable call and is enabling other server manufacturers to build systems around it.
Google and NVIDIA are co-founding members of the OpenPOWER Consortium. IBM hosted over 9,000 attendees at its Impact Business and IT Conference in April, and demonstrated GPU acceleration working in the IBM Java framework on a Hadoop based analytics problem. With new product announcements from HP, Dell, IBM, and Cisco, the world’s top three servers according to Gartner’s server report the HP DL380p, Dell 720, and IBM x3650 are all now available with NVIDIA Enterprise GPU. And NVIDIA GRID is now available in more than 50 server platforms from 18 OEMs or ODMs.
Further accelerating growth is the news from GTC that Vmware ESX will soon fully support virtual GPUs. Much of the prior interest had been generated on the Citrix platform and ESX had only supported GPU pass-through, which meant one GPU per user. Supporting a vGPU means, it can now translate that GPU and share between users. NVDIA is already seeing ESX sites start evaluating grids today in the expectation that they’ll add vGPU as soon as it’s available, probably supporting both Citrix and VMware is an important step in the evolution of this business.
The booming gaming market and the new releases with synergies will certainly helps in growth of the Company. Right now, the stock is trading at levels which greatly discount the strength of NVIDIA's core business. NVIDIA is one of the cheapest stocks available, and in the long-term the Company is poised for success.