The recent, rapid growth of mobile gaming has led some analysts to forecast the decline of traditional gaming consoles. Yet Xbox and PlayStation have held up well in the face of this threat -- the often shallow experiences offered on mobile platforms haven't matched traditional, high-powered consoles. But NVIDIA (NASDAQ:NVDA) could be about to change that. Its new device, the successor to Project SHIELD, is a tablet that doubles as a traditional video game console. If successful, it could put pressure on AMD (NASDAQ:AMD).
The Shield tablet
NVIDIA's new Shield is an 8-inch, Android-powered tablet. In terms of hardware, it's not notably remarkable, with a high-definition screen, front-facing speakers, and standard components. Unsurprisingly, the device is powered by the company's own Tegra K1 -- its newest, most powerful mobile processor.
What sets NVIDIA's Shield apart from other Android tablets is its gaming focus. Paired with up to four controllers, the Shield can act as an Android-powered video game console, even outputting to a television when connected via an HDMI cable. When plugged into a TV, the tablet automatically shifts to console mode, bringing up a custom user interface that is optimized for a controller.
NVIDIA is building a gaming ecosystem
In addition to playing Android games, the Shield can also serve up the vast majority of traditional PC titles. These games do not run on the Shield tablet itself, but are streamed remotely from a paired PC -- assuming, of course, the computer is equipped with one of NVIDIA's video cards.
A PC with an AMD card, NVIDIA's rival in the dedicated graphics space, simply won't do. While AMD's video cards may be just as capable and are often cheaper than NVIDIA's, they cannot match NVIDIA when it comes to streaming. AMD has nothing in this department, with no dedicated hardware and no Shield competitor.
The Shield enables NVIDIA to establish an ecosystem around its video cards -- PC gamers interested in the Shield would purchase one of the company's cards when they otherwise might have chosen AMD. But thus far, this feature -- which has been accessible on Project Shield since last year -- does not seem to have had much effect on AMD's business.
AMD shares tumbled after the company reported earnings earlier this month, but its graphics division experienced healthy growth: Revenue in that segment rose 5% sequentially and 141% from the prior year. Nevertheless, the Shield initiative is something AMD shareholders should be mindful of. If it takes off, it has the potential to weigh on AMD's graphics cards.
In need of software
At the same time, it could also hurt AMD's semicustom chip business. AMD supplies both the PlayStation 4 and Xbox One, and strong demand for both consoles has benefited the company's business and contributed to its earnings in recent quarters.
With a traditional controller and the ability to hook up to a TV, NVIDIA's new Shield tablet is every bit an Xbox and PlayStation competitor. At $299 ($359 with a controller) it's cheaper than both, and the Tegra K1 makes it nearly as powerful. When not docked to a TV, it can be toted around and obviously used like a traditional tablet.
But despite its advantages, NVIDIA is unlikely to take out the major console players, at least not in the near future. Though interest in Android gaming is growing, the games are simply not there -- outside of a handful of old ports, there are few blockbuster titles -- certainly no Halo or Uncharted. However, this could change in time, as forthcoming Android TV set-top boxes could popularize the concept.
NVIDIA's Shield tablet is unlikely to have a major impact on its business, or AMD's, in the near term. Still, it holds a lot of potential, and represents an important step forward for Android gaming.
Sam Mattera owns shares of Nvidia. The Motley Fool recommends Apple and Nvidia. The Motley Fool owns shares of Apple. 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.