NVIDIA’s Notebook Gaming Business Grew by more than 50%, CAGR for the past three years

During the first few moments of NVIDIA’s Q1 fy 2015 Earnings Conference Call, Chris Evendon, who heads Investor Relations for NVIDIA reported the company had achieved better than 50% CAGR for “the last 3 years” for NVIDIA’s notebook gaming products. Mr. Evendon also claimed NVIDIA has grown its market share of the PC workstation gaming business to its “highest level since 2010”.

NVIDIA’s performance in the PC Gaming market brings into question their product marketing plans. Does it make sense for the company to maintain activity across a horizontal set of new markets?

  • Tablet Computers via the Tegra® Chips
  • Cloud IaaS via NVIDIA’s GRID product
  • Automobile In-Dash Displays via the Tegra Chips
  • Vehicle Manufacturing (Tesla is the leading example), via NVIDIA’s “GPU-based machine learning” product

Rather than focusing further on the PC Gaming market?

Readers sharing my interest in this question might want to consider each of the following points:

If rumors can be believed, Microsoft® plans on replacing the NVIDIA Tegra chip with Qualcomm’s SnapDragon for the next generation of its Surface tablets. The greater tablet market may produce further substantial challenges for NVIDIA as Intel® enhances Atom to better meet market needs and wins over more OEMs to its architecture. Of course, Intel is only one of NVIDIA’s chip competitors in this market.

The largest market opportunity for GRID seems to be enterprise business’ needs for a desktop virtualization solution for graphics displays. Mr. Evendon reported “a 25% increase in the number of boards sold over the previous quarter.” The big question, of course, is desktop virtualization market size. I am not aware of a definitive answer to this question. In my opinion, Microsoft’s decision to sunset the Windows XP O/S was a big driver for desktop virtualization, and U.S. Government organizations were likely the biggest category of users likely to look for this type of fix. But older PCs powered by Windows XP, in 2014, are not likely to be big consumers of Graphics software. Bottom line: I am not sold this is the kind of big market warranting a lot of product attention from a business with an annual run rate under $8 Billion.

Automobile In-Dash Displays
In contrast, the market for in-dash graphics and multi media displays is, in my opinion, is a substantial opportunity. NVIDIA has scored some big wins at the high end of this market — Audi, Porsche, Lambourghini, etc. But the real volume is at the lower end. So it would be comforting, for investors, to learn about some wins for NVIDIA with high volume automobile manufacturers.

But this quarterly report does not include any mention of a win, or even serious discussions with a mainstream automobile manufacturer.

GPU Machine Learning
NVIDIA’s continued success with Tesla is, once again, good news, but not the big volume sales indicator some investors may be after. The reports of healthy levels of interest from IBM and Google, on the other hand, are encouraging, but some time will be required to see just how these opportunities develop for the business.

One would hope NVIDIA continues to add the kind of features the PC gaming market (across workstations and notebooks) continues to be after to ensure no slow down in the velocity of this business as the company works on new sectors. Perhaps management will opt to reduce the horizontal extent of its new product development efforts to ensure adequate resources are available, as they are required, to add to early evidence of success.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved

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