) Tegra 4 chip no longer looks like a growth driver for the
company. Instead of benefiting from the enormous expansion of the
mobile market, Tegra
seems to be a technology facing hurdles. Jen-Hsun Huang, the
company's CEO, expects that Tegra will be
a drag on earnings
, and with shares trading strongly above a $12-$13 range earlier
this year, Nvidia could start to fall from here.
Mixed Quarterly Results
In the second quarter, the CEO said that Tegra revenue could be
down from as little as $100 million to as much as $300 million. In
the last quarter, sales for Tegra 3 dropped 49% from the previously
reported quarter, and 71% compared to last year. Sales will not
grow in the short term, because customers are shifting from Tegra 3
to Tegra 4. Huang also singled out
particular platform as a source of disappointment, without going so
far as to name names. But it is highly likely that Nvidia was
) and its
Support for Surface RT 2
Nvidia is willing to stay the course with Microsoft's Surface, and
will provide the chipset when Microsoft refreshes the tablet line.
But by reducing its sales expectation for Tegra, Nvidia is also
anticipating light sales for the Surface.
Microsoft should not be blamed entirely for weak Tegra 3 demand.
Tegra also powers
) Nexus 7, but the performance of this device is sluggish. The
refreshed Nexus 7, which is rolling out now, will
the Tegra 3 chipset with one powered by
). Google will be powering the new Nexus 7 with a Snapdragon S4 Pro
SoC at 1.5 Ghz, compared to 1.2 GHz with the original Nexus. The
graphics chip will be an Adreno 320 GPU.
Core PC Market
The PC market remains an important source of sales for Nvidia. The
company is competing with
Advanced Micro Devices
), but expects to experience strong demand for its high-end
graphics chips across the desktop, workstation, and server markets.
Nvidia's sales in graphics chips overall for desktop and notebook
markets is also anticipated to grow in the current quarter.
AMD is up 54% in 2013, compared to 19% for Nvidia. AMD is pinning
its growth on chips for the console market -- its latest
of system-on-chip (SOC) design, a dual core x86, uses even less
energy than before.
Source: Zacks Investment Research
Nvidia Shares Could Get Stuck in a Rut
Weak sales for Tegra could limit any upside in Nvidia shares. At
best, the stock could trade in a range between $14 - $15. Any
sell-off below this might be limited, due to the support of sales
growth in the PC market. The mobile Kepler GPU, which took the
company three years to launch, should continue to support revenue
growth. Looking to the long term, a lack of contract wins for Tegra
could hurt Nvidia's share price regardless of the company's success
in the PC market.
This story by
originally appeared on
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