Has NVIDIA Peaked?

NVIDIA (NVDA) reaped huge profit previous year and the company is off to a great start this year as well. NVIDIA’s stunning growth this year is mainly due to the launch of its new architecture “Pascal” for designing new graphics cards. Recently, NVIDIA launched three new graphics cards, two for the high-end users, and one for the main-stream users, based on its Pascal architecture.

GTX 1080 and GTX 1070 (high-end graphics cards) were launched first, and performed very well. The company observed huge demand mainly for GTX 1070 as it became out of stock soon after the launch on the official website of NVIDIA.

In contrast, NVIDIA’s foremost rival, Advanced Micro Devices, also launched its new graphics cards based on its latest “Polaris” architecture.
Advanced Micro Devices’ Radeon RX 480 is mainly designed for mainstream users. Initially, RX 480 observed some over power draw issues which has been noticed by the company, and it has detailed a driver fix to overcome this issue. However, the main advantage for Advanced Micro Devices is the price of Radeon RX 480.

On the other hand, some days after the launch of RX 480, NVIDIA also launched its new graphics card “GTX 1060”, specially designed for mainstream users. Furthermore, GTX 1060 is priced at $249, $50 more as compared to RX 480. However, NVIDIA’s GTX 1060 graphics card provides much better and efficient performance as compared to Advanced Micro Devices’ RX 480 for just an additional $50.

Apart from this, Taiwan Semiconductor has shared strong revenue of $2.523 billion, a surge of 35.8 percent year over year. The above figure is very surprising, as the company was struggling due to the sluggishness of the high-end smartphone market as well as decelerating demand for Apple’s (AAPL) iPhone.

As an outcome, this clearly indicates that NVIDIA has got a huge revenue boost, as TSMC is an exclusive source for the Pascal GP104 GPU used in the NVIDIA’s latest graphics cards based on Pascal architecture.

Conclusion

I have been bullish on NVIDIA for quite some time. Despite its rich valuation, NVIDIA has moved higher after each of my buy calls, and since I expect the company to report strong earnings this quarter as well, I am still bullish on the stock going forward.

Although Advanced Micro Devices has performed very nicely in targeting the mainstream market, I still think NVIDIA will emerge to be a winner over the long-run.
Published on Aug 3, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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