NVIDIA (NASDAQ:NVDA) doesn't release its next earnings report until May 21, but results should be strong based on recent trends in gaming. 

March was a record quarter for digital spending on games, according to SuperData. NVIDIA just launched its new RTX Super gaming laptops through its manufacturing partners. The high level of engagement among popular titles such as Activision Blizzard's Call of Duty: Warzone, during the COVID-19 crisis is likely to drive plenty of demand for new gaming hardware, despite the slowdown in the economy.

Several analysts who cover NVIDIA rate the stock a buy, and the bullish sentiment seems warranted. In addition to demand from gamers, many people are working at home and may be in the market for a powerful new laptop to fill their professional needs. Both trends can translate to strong demand for the new RTX Super line in the short term.

A laptop running a video game with an NVIDIA graphics card sitting to the side of the computer.

Image source: NVIDIA.

Recent momentum in gaming laptops

It's no coincidence that this is the largest launch ever for NVIDIA's GeForce laptops. The RTX Super laptops launched during the company's fiscal first quarter on April 15 with over 100 designs from every major original equipment manufacturer (OEM), including Acer, Asus, Lenovo, and HPDemand for gaming laptops has been soaring in recent years as users seek desktop-class power in a portable form factor. 

NVIDIA's Max-Q technology was introduced in 2017 and made laptops thinner and faster, all of which has contributed to the surge in demand. Gaming revenue for the company has increased 36% since fiscal 2017 and makes up the largest chunk of NVIDIA's top line. 

Two charts showing a breakdown of NVIDIA's revenue by segment and a bar chart showing the growth in gaming revenue relative to other segments.

Image source: NVIDIA investor presentation. 

Both NVIDIA and Advanced Micro Devices (NASDAQ:AMD) have reported strong growth in laptop sales. The former reported gaming laptops posted double-digit year-over-year growth in the fiscal fourth quarter (which ended in January), marking eight consecutive quarters of growth. 

AMD has similarly cited healthy demand in the first quarter for new notebooks featuring the Ryzen 4000 processors. AMD remains on track to launch its next-generation gaming graphics processing units (GPUs) later this year. Management guided for approximately 25% growth in revenue for 2020, which is a good sign of things to come when NVIDIA reports its fiscal first-quarter earnings later this month. 

RTX upgrade cycle in full swing

There are more than 200 million users of NVIDIA's GeForce graphics cards, according to company estimates. About 15% of these users have upgraded to the latest RTX 20-series GPUs as of January. The current stay-at-home environment coupled with new improved gaming technology should spur that upgrade cycle in the near term.

NVIDIA launched the RTX Super cards last year for desktop, which offered a marginal boost in performance over the original RTX cards that launched in 2018. 

The new RTX Super-powered laptops include several features, such as Dynamic Boost that shifts power between the GPU and CPU to deliver optimal performance during heavy workloads like playing games. Other features like Advanced Optimus and deep learning super sampling (DLSS) 2.0 allow games to run at smoother frame rates and render realistic images using artificial intelligence, all while extending battery life. 

NVIDIA holding strong

The latest market share data from Jon Peddie Research shows that NVIDIA has held its dominant position in the discrete graphics card market. AMD's share ticked up one point to 27% in the fourth quarter, but NVIDIA is still maintaining a wide lead with a 73% share. 

Investors are high on NVIDIA right now. The stock is up nearly 30% year to date, while the S&P 500 remains down so far this year. After a strong quarter from AMD, investors will be expecting a similar outcome for its bigger rival. 

The first quarter is typically a slow period for sales of graphics cards, but the worldwide lockdowns may provide an unexpected boost for this tech stock. We'll know more when NVIDIA reports earnings on May 21.