How will today�s big architecture news from Intel (INTC) affect shares of NVIDIA (NVDA)? While the AMD-copying angle is certainly headline-worthy, also of importance to NVDA shareholders is the fact that have a sense for Intel�s plan now.
NVDA shares have recently traded down over fears about what Intel might be planning, and getting some real news out there might actually help the stock. Clarity is always useful, and at least now we know � Intel is hoping to layer its own graphics processors (Nvidia�s bread & butter) right onto their multi-core CPU�s, effectively doing an end-run around NVDA.
Again, everyone knew that Intel was going to beef up its discrete graphics chip business, which has historically lagged well behind both Nvidia and ATI (ATI was acquired by AMD last year). It was just a matter of how much muscle Intel would put behind it, and what kind of timetable investors could expect.
So far the muscle variable seems big, and the timetable could have production starting in the second half of 2008, putting any major product launches into the early 2009 area. So far NVDA has isolated itself as the winner in the high-end markets, but the question remains of whether they can compete with a motivated Intel.
This fact, along with poor releases for both of NVIDIA�s near-term growth drivers (the PS3 and Microsoft Vista), has pushed the stock down to $29.21, and is now down about 20% so far in 2007. The stock may have been due for a breather after hitting fresh all-time highs late last year, but lingering concerns have kept the attractive valuation (16x forward earnings, .9 PEG) from propping up the share price.
Today�s news could signal the end of the hidden con! cerns fo r NVDA shares and allow valuation to be a central theme going forward. We proposed a break-up value for the company that would suggest upside from today�s levels.
Of course, if Intel fails in this most recent attempt to invade NVDA�s core market, it could always become a potential suitor for the company again.
Ryan Barnes
March 29, 2007
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