Notebook and PC gaming has grown at an astonishing annual rate of 51% in the past three years. This has helped chipmaker NVIDIA (NVDA 3.65%) increase its revenue and earnings at a decent clip. Since NVIDIA specializes in graphics processing units. or GPUs, the company's performance has been outstanding and the recently reported first quarter was no different. However, will NVIDIA be able to sustain the momentum in the face of competition from AMD (AMD 2.44%)? Let's take a look.

Robust results point toward a bright future
NVIDIA posted solid results. Revenue increased 16%, year over year, to $1.1 billion, and non-GAAP earnings increased 61% to $0.29 per share. The robust performance of Tesla, Quadro GRID, and Tegra graphics have helped the company perform well despite weakness in the PC market. Going forward, NVIDIA expects significant growth in its graphics segment, as gamers continue to buy high-end GPUs to play the latest PC games.

As a result, NVIDIA expects a strong performance from its newest flagship GPU, the GeForce GTX Titan Z, scheduled to be launched in the current quarter. The company expects this product to gratify both PC enthusiasts and CUDA developers, since it is the best-performing graphics card that NVIDIA has ever designed.

The chipmaker is also expanding its addressable market by targeting the mobile segment. By providing its graphics solutions for a wider range of applications, including cars and data centers, NVIDIA looks well-positioned for the long run.

A strong GPU market and product innovation to drive growth
The chipmaker is counting heavily on its GTX 750 series graphics card that targets entry-level gamers. NVIDIA is seeing strong demand for GTX 750, and the company is also busy promoting its graphics chips aggressively. The chipmaker is also organizing various marketing initiatives such as its GPU Technology Conference to promote its GPU business.

Being the leading player in GPUs, NVIDIA's GPU Technology Conference is a gauge of the popularity of these chips. According to the company, this year's conference was the most successful in its history. More than 3,500 guests attended the conference and nearly 550 talks were held. Both of those numbers were up by 25% versus last year's conference. Moreover, about 1,000 articles on the event were published in the press, and NVIDIA's blog recorded more than 305,000 views. This shows that the market for graphic chips is still strong, and NVIDIA is going all out to make the most of it.

NVIDIA has also launched a new family of notebook gaming GPUs based on the Maxwell architecture. Its new products are expected to enhance performance and battery life in a thin form-factor. NVIDIA has started shipping these products to every major original equipment manufacturer in the current quarter. In addition, the company is expecting to gain market share in the workstation business after another quarter of solid growth.

All these moves should enable NVIDIA to fight competition from AMD, its arch rival in the GPU business. AMD's graphics business has gained some momentum of late, with the company gaining a spot in Apple's Mac Pro. The device uses two of AMD's FirePro GPUs, and going forward, the company is expanding its suite of solutions with the new flagship FirePro W9100. This new chip is expected to address the needs of people requiring 4K resolutions and higher.

NVIDIA needs to continue its product development aggressively to stay ahead of AMD.

GRID growth continues
The availability of NVIDIA GRID in more than 50 server platforms should lead to an increase in revenue going forward. NVIDIA's GRID trials have grown nearly 35% since last quarter to nearly 600 worldwide. In addition, the company witnessed a 200% year-over-year increase in GRID boards. NVIDIA is aggressively converting GRID trials into significant pilot projects, with many of them being in big blue-chip and government accounts.

Apart from this, GRID's vGPU will provide the full benefit of NVIDIA hardware-accelerated graphics for virtualized solutions to customers. This technology is expected to deliver excellent graphics performance for virtual desktops, equivalent to local PCs when sharing a GPU among multiple users. NVIDIA says that the GRID vGPU is the industry's most advanced technology for sharing true GPU hardware acceleration between multiple virtual desktops, without compromising the graphics experience.

The bottom line
NVIDIA's product development looks strong along with the prospects in the GPU market. At a trailing P/E of only 21, NVIDIA looks like a good buy, since its earnings are growing at a terrific pace. The company has a good dividend yield of 1.90%, which can increase in the future as the payout ratio is only 37%. NVIDA looks like a good investment for the long run.