NVIDIA Makes an Interesting Point

NVIDIA makes a great point about integration of communications IP in high-end products.

Feb 18, 2014 at 3:00PM

NVIDIA (NASDAQ:NVDA) had a great quarter and issued pretty stupendous guidance. There was very little, if anything, for critics to latch on to. GPU sales are doing well across the board, from gaming to workstations. Tegra has bottomed and is climbing back up with gusto, and GRID seems to have some real promise. Just how much upside it can drive is still pretty unclear, but it's all additive, so it's a win. NVIDIA's business is doing fantastically, despite AMD's protests that it's about to claw back significant share.

NVIDIA doesn't do low end
A hot trend in the mobile system-on-chip market has been toward the integration of just about everything possible, including the cellular modem and connectivity. Qualcomm (NASDAQ:QCOM) and Intel (NASDAQ:INTC) -- at least in its lower-end and mainstream parts -- seem dead-set on pursuing tight integration of communications, connectivity, and so on. This is important for the high-volume, low-cost part of the market.

However, despite the fact that NVIDIA does have an integrated part for this market, known as the Tegra 4i, it's clear that the company is much more interested in pursuing Tegra as a higher-performance chip targeted at tablets, all-in-one PCs, point-of-sale terminals, in-vehicle infotainment, and so on. NVIDIA has been quite clear that it wants to pursue sockets where graphics makes a difference. This suggests that NVIDIA would like to target the upper half of the phone market, as far as price points are concerned.

The integration question
Particularly interesting on the call was the following response to a question from the Topeka Capital Markets analyst regarding integration of the cellular modem in high-end parts:

Well, the super-phone market is really moving fast. And so integration is sometimes a good thing, and integrations sometimes hurt you. It's just a higher risk to integrate four things that are -- that need to be state of the art at the same time. And so some companies use things like Tick-Tock to articulate the benefit of strategies and methodologies to reduce your risks. Some companies like us, we call them ping-pong and we try to reduce our risk by moving one piece at a time, so then you can innovative on rhythmic and continuous basis even though the market is moving dramatically. And so integration sometimes helps you, sometimes it doesn't help you. And it's just hard to say.

Qualcomm has announced a 20-nanometer LTE-Advanced modem but has yet to announce a 20-nanometer applications processor, which would presumably feature an integrated modem. Intel, too, has signaled that even its first 14-nanometer high-end product, Broxton -- scheduled for mid-2015 -- would not feature an integrated modem. Only at the very end of 2015 would it have an integrated 14-nanometer part for the low-end and mainstream of the market.

Further, it's interesting to note that Apple, which is the king of high-end smartphones, continues to very heavily invest in beefing up its applications processor but doesn't seem to be serious about integrating connectivity or communications. If it were, it very likely would have purchased the Renesas Mobile asset, which included a very nice, carrier-certified LTE modem. Perhaps NVIDIA and Intel are on the right track by not integrating modems in their highest-end products?

Foolish bottom line
NVIDIA's core competency at the end of the day is building world-class GPUs. It would stand to reason that the best way for the company to carve out a profitable niche for itself in the very crowded mobile apps processor market would be to focus on having the world's best graphics in a mobile chip. This doesn't lead NVIDIA to having huge amounts of market share in mobile, but it will be able to attack higher-margin/higher-ASP products and have a more defensible position. NVIDIA's size is such that winning this high-margin business would be more than enough to drive the top and bottom lines significantly. 

The next big trend in mobile computing is here, and you can profit
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Ashraf Eassa owns shares of Intel and Nvidia. The Motley Fool recommends Apple, Intel, and Nvidia. The Motley Fool owns shares of Apple, Intel, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers