3 Reasons Nvidia Looks Good Despite Its Loss

400px-Nvidia_logo.svgNvidia may have reported a loss of $201.3 million for its fiscal 2010 first quarter after the markets closed yesterday, and a 42 percent drop in revenue from the same period a year ago, but the company still has quite a few things going for it. The trick will be whether it can execute well in the quarters ahead. Here are the three things that could keep Nvidia on top, without accounting for growth in its scientific and mobile computing products, which the company is also expected to ramp up this year.

Apple: Nvidia’s MCP business, which includes the chips it sells to Apple for its MacBook notebooks, was up 94 percent this quarter over the fourth quarter of fiscal 2009. Given that Apple notebooks recently earned the top spot in a Consumer Reports survey, it’s likely those sales will continue to drive growth.

Boost in Demand for PCs and Video: Nvidia improved its market share in the desktop GPU market during the first three months of the year, and saw demand for GPUs rise after an inventory correction. Fancy graphics and more movies and TV viewed on PCs mean more love for graphics chips. Personal tech guru Walt Mossberg last month even advised folks to focus on buying higher-end, discrete graphics processors when upgrading their PCs. However, this growth in market share may be coming at the expense of margins, which fell to stand at 30.6 percent as of March 31.

Next-Gen Manufacturing: Nvidia is shifting its product mix from 65-nanometer products down to 55 nm and 40 nm chips, with analyst Doug Freedman of Broadpoint AmTech estimating that by the end of this year, 25 percent of Nvidia’s chips will be the smaller size. Switching to smaller process node means Nvidia will lower the costs associated with manufacturing its chips and could generate higher margins.

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