Echoing my Foolish colleague Seth Jayson's sentiments, investing in 3D graphics producers is not for the faint of heart. Stocks like Motley Fool Stock Advisor pick NVIDIA (NASDAQ:NVDA) and ATI Technologies (NASDAQ:ATYT) are subject to wild swings because of the cyclical nature of this industry. These two companies are dependent upon major new product releases, much like we're about to see in the next few months.

Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) will be taking the gloves off in the coming weeks as they wrestle for video console supremacy. Microsoft's upcoming Xbox 360 launch is not only good news for game developers like Stock Advisor pick Electronic Arts (NASDAQ:ERTS), but ATI should also get a boost as the provider of video chips for the new unit.

ATI, however, has more to look forward to than game consoles this holiday season. Motorola (NYSE:MOT) has chosen ATI as a partner in the production of the iTunes phone that will be made available initially through Cingular Wireless. Additionally, ATI provides graphics cards for Apple (NASDAQ:AAPL), which should see strong sales for its ultra-cool iMac G5.

With these impressive toys hitting consumer shelves over the holiday season, investors need to take today's earnings release from the company with a grain of salt. Yes, net sales were $100 million less this quarter than in the same period a year ago, representing a 17.9% decline. Yes, gross margins, including its inventory write-down, took a whacking down to 9% from last year's level of 33.8%. And yes, the company lost $104 million this quarter compared with a gain in net income of $61.2 million a year ago. But a new season is upon ATI, and it's a good bet that its stock will make for a good stocking stuffer.

Looking a quarter ahead, the company anticipates being back into double-digit figures both in revenues and gross margins. With the upcoming growth cycle, a rock-solid balance sheet, and shares that have been in a tailspin over much of the past year, it may be time to put ATI on your wish list before Christmas rolls around.

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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.