NVIDIA (NVDA, Financial) has taken a lead in the graphics processing market. In 2015, the company snatched a majority of the market share from its rival Advanced Micro Devices (AMD, Financial). Moreover, the company has performed well this year due to the launch of its new GPU architecture, Pascal.
Sales are escalating in its core gaming market due to the launch of efficient Pascal-based graphics cards. Not only has NVIDIA relished rising demand entirely for its graphics cards, but also progressively grew its share of the lucrative market to approximately 80% by the end of 2015.
However, despite the weak market, NVIDIA showed no signs of decelerating when it unquestionably crumpled expectations with its second quarter few weeks ago. In the second quarter, revenue surged 24% year-over-year to $1.43 billion.
On the other hand, the company’s data center sales surged more than twice year-over-year due to the steady demand for the company’s Pascal-generation GPUs and surging market interest in the deep learning applications facilitated by the company’s tech.
Apart from this, NVIDIA is also putting in a lot of effort to attain a robust position in many emerging industries, such as driverless cars, deep learning and artificial intelligence (AI). All these markets could see huge growth in the next 10 years. However, hastened gains in each of these segments contributed to record results for the company in the previous quarter.
It is known that NVIDIA strategized to achieve a strong grip on the high-end market first, whereas Advanced Micro Devices used the opposing strategy of placing its focus on the mainstream market. However, the company is on its way to launch a new Pascal-based graphics card, GTX 1050. The company will also launch GTX 1050 Ti, therefore taking the game to AMD.
The company will likely launch the notebook version of these cards as well. These cards should be quite powerful, offering superior performance on gaming capable systems.
Conclusion
Even if NVIDIA loses some market share to AMD, the former’s future looks bright. In fact, I think long-term investors should hope for a market share loss in the short term to open up better buying opportunities for NVIDIA in the long run.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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