NVIDIA Corporation (NVDA) Set To Gain At The Expense Of Advanced Micro Devices Inc. (AMD)?

NVIDIA corporation stock received a much-needed boost with Goldman Sachs reiterating a bullish stance. Will the GTX 1080 Ti lift NVDA stock higher?

NVIDIA Corporation (NVDA) Set To Gain At The Expense Of Advanced Micro Devices Inc. (AMD)

Shares of GPU market leader NVIDIA (NASDAQ:NVDA) have been extremely volatile in the last few trading sessions. The last 30 trading sessions have seen NVIDIA stock trade at a high of $120.92 and a low of $95.17 per share. That's a swing of over 20% in less than 2 months. NVDA stock hit a peak on Feb 7 and has moved downhill ever since, closing the last trading session at a price of $98.74 per share. As we had covered in our recent post, with NVIDIA stock setting up for a death cross, the near-term future looks bleak, to say the least. However, we believe the long-term growth story is still intact, and the current pullback in NVIDIA could offer good entry points for long-term investors. Here is why.

NVIDIA just launched the fastest GPU Ever

The recent Game Developers Conference (GDC 2017) saw NVIDIA bring its A game to the event. The company, in what was possibly a pre-emptive strike on AMD's upcoming 'Vega' launch, unveiled its latest graphics card, the GTX 1080 Ti. The latest update brought significant performance improvements over its predecessor, the GTX 1080. In a recent post on Forbes, Tirias Research wrote, "With higher clock speeds and faster memory, NVIDIA increased the 1080 Ti performance 20% to 45% faster than the current GTX 1080. The “Ti” brand is a traditional NVIDIA mid-life “kicker” product, but with the company’s  35% nominal performance increase, this version is the company’s most aggressive Ti product yet." Given the fact that performance improvements of this magnitude are usually reserved for new product launches, NVIDIA is certainly looking at the 1080 Ti as more than a mid-life booster to the older generation GTX 1080. And well, it could well be the fastest card ever launched by NVIDIA. Yes, faster than the Titan X. Quoting Mark Waldon and Sam Machkovech from a recent post on Ars Technica, "Nvidia claims the GTX 1080 Ti is around 35 percent faster than the GTX 1080, which makes it ever so slightly faster than the £1,100/$1,200 Titan X."

If you thought that the latest and greatest from NVIDIA's product line-up will burn a hole through your product, you couldn't be more wrong. The company has priced its new product at a fairly modest $699. And what's more, in a deviation from previous launches, the Founder's edition versions will come at the same MSRP as the custom cards. NVIDIA also had other plans for customers with modest budgets. The price of the GTX 1080 has been slashed to $499. In an additional effort to befriend those with tight budgets, NVIDIA announced that the memory improvements in the 1080 Ti will also be featured on newer versions of the GTX 1080 and GTX 1060, which should be launched later this year.

NVIDIA's GTX1080 Ti could eat into AMD's market share

In one of our recent posts on NVIDIA, we had highlighted the bearish commentary on NVDA stock, which was centered around the firm's gaming segment. Given that the gaming segment makes up over 60% of the total revenues of NVIDIA corporation, the negative outlook had an immediate impact on NVDA stock, sparking a sell-off in the stock  As outlined in another one of our recent posts, we believe that the outlook for NVIDIA's gaming segment is much brighter than what the recent bearish commentary would have us believe.

The launch of the GTX 1080 Ti might well be the catalyst which helps NVIDIA deliver solid growth in its gaming segment. As per recent commentary from the desks of Goldman Sachs (NYSE:GS), analyst Toshiya Hari believes that the new product could drive solid sales in the high-end GPU market as a result of pent-up demand in the market. Moreover, with AMD's Vega launch still months away, the GTX 1080 Ti will also benefit from the lack of strong competition in the high-end GPU space. Quoting the Goldman Sachs analyst, "we believe consumers had expected a launch at CES in January (Nvidia’s fiscal fourth quarter), leading to a pause in purchasing in Dec/Jan. Given the nearly two-month delay as well as the lack of any new AMD products for the next 1-3 months, we would expect Nvidia to benefit from what is likely significant pent-up demand in the high end."

As reported by CNBC, the GS analyst also wrote that the GTX 1080 Ti could take market share away from Advanced Micro Devices, Inc. (NASDAQ:AMD), which has seen its share of the discreet GPU market share rise in the last couple of quarters. If this scenario does pan out, the road ahead for AMD could just get tougher. This also means that the upcoming 'Vega' GPUs will have to be significantly superior in order to drive sales anywhere close to what investors have been pricing into the AMD stock. AMD stock is up by a whopping 450% in the last 1 year, as expectations from the Ryzen CPUs and Vega GPUs have soared. Could the GTX 1080 Ti have delivered a telling blow to AMD's hopes even before the launch of the Vega GPUs? Well, that's something only time will tell. For the time-being, NVIDIA seems to have come out with a winner which will certainly give them incremental momentum in the GPU space, which should help the company maintain the strength in its 'Gaming' segment.

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Virendra Singh Chauhan Virendra Singh Chauhan   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

Buying and selling of securities carries the risk of monetary losses.Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions.

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