nVidia got no love from the street these days. After yesterday’s earning (earning call here), the stock dropped more than 10% today amid weak (margin) forecast. This exemplifies that the market tends to be short sighted.
Some backgound about nVidia and its main product (corp web site) GPU (wikipedia) (or graphics chip, graphics board). Nvidia was doing very well until late 2007 amid the booming of computer game, and the need of high end graphics cards for workstation and laptop. Then bad things happened, the quality problem which cost $200 million for replacement or repair; and the economy recession (all hardware companies got hit, from Intel to everyone else). There are lots of naysayers such as some analysts. But I think they made a mistake just by looking at financials. I doubt very few analysts listened to the conference call actually understand the technology details said by CEO Jan-Hsun Huang. As to margin pressure, we can take cue from Research in Motion recent earning report (RIM exceeded expectation because they put pressure on suppliers). Can RIM and others continue to do this forever?
I don’t know. The only thing I know is, Nvidia is the No. 1 GPU maker in the world, and GPU is finding markets in new areas such as smartphone, netbook, in addition to traditional desktop and laptop PCs (Macs). Even in PCs/Macs, there are new applications in oil & gas exploration, health imaging,…so the future is bright. Yes, the competition will be tough, Intel, AMD (ATI). But they could come out fine as they did before. Near term, things could be challenging because of the economy and the slow sales of desktop computers. Long term, think digitial display in our daily lives, from blackberry to iPhone, from Leveno to Macbook, they are all powered by nVidia.