AMD
NVIDIA (NVDA) PUSHED OUT BY ADVANCED MICRO DEVICES (AMD) AT APPLE (AAPL)
February 24, 2011
In a prior post, we forewarned that Apple (AAPL) may push out Nvidia (NVDA) in favor of Advanced Micro Devices (AMD). Now the news is out. New Mac Books will include AMD’s “Radeon†graphics chips in the 15-inch and 17-inch models, replacing parts previously supplied by Nvidia.
Now one part of our negative thesis on Nvidia has come true. We will maintain our remaining short position on Nvidia. Yesterday we take partial profits on Nvidia in keeping with the discipline imposed by the ZYX Change Method.
QUALCOMM (QCOM) TO COMPETE WITH NVIDIA (NVDA) ON GRAPHICS
February 2, 2011
Traditionally, NVIDIA (NVDA) is a manufacturer of graphics cards marketed under the name GeForce. Typically, low end PCs and notebooks offer graphics capabilities integrated with the CPU. The high end units offer better graphics performance by utilizing separate graphics chips from NVIDIA or Advanced Micro Devices (AMD). Unfortunately for NVIDIA, Intel (INTC) is introducing in its new Sandy Bridge processor integrated graphics capabilities, which are on par with NVIDIA chips. NVIDIA is expected to lose as much as half of the traditional business as the new chips from Intel become widely available.
In spite of the foregoing harsh reality, NVIDIA’s stock price has nearly doubled in a very short period. Investors are enamored with NVIDIA’s new Tegra chip for smart phones and tablets. To date, NVIDIA has not generated a single dollar from the sale of Tegra. The basic technology in Tegra does not belong to NVIDIA, but instead is licensed from a British company Arm Holdings (ARMH) whose chips run the iPad and iPhone. NVIDIA has simply added its graphics capabilities to an Arm core and the result is Tegra.
Lately, after the Consumer Electronics Show, investors have been especially enamored with NVIDIA adding graphics capabilities to an Arm core. The exuberance arises from an almost universal belief that Tegra is the only chip available with graphics capabilities for the mobile market.
I am an electrical engineer with deep expertise in this matter. I have been writing that exuberance shown by NVIDIA fans is irrational and powerful competition from the likes of QUALCOMM (QCOM), Texas Instruments, Intel, AMD and MIPS is not far away. Now there is some publicly available proof in QUALCOMM’s earnings call that NVIDIA fans are wrong.
On the call, QUALCOMM’s chip set division chief, Steve Mollenkopf, said that QUALCOMM will ship samples to customers this year of 8960, a chip that combines graphics processing and an LTE modem.
QUALCOMM also plans to add graphics capabilities to all of its Snapdragon line of application processors. Investors’ expectations on NVIDIA do not include QUALCOMM adding graphics capabilities to its chips so quickly.
Clearly, competition for NVIDIA’s graphics capabilities is here. Investors have not yet connected the dots as is evidenced by a lack of reaction in NVIDIA’s stock price, thus presenting an opportunity to sell short NVIDIA when its stock price is levitating. It will take only one analyst to connect the dots and the rest of the analyst community will follow. We should see a quick 25% drop in NVIDIA stock price when analysts catch on.
Tegra’s superior graphics capabilities may have an edge only in the very high end devices. We are not going to see billions of very high end devices sold in the near future, but the present NVIDIA stock price is based on Tegra becoming the mainstay of billions of devices.
The key to making money in the market is to build positions ahead of the crowd and take big profits when the crowd catches on. QUALCOMM’s call confirms that such an opportunity is at hand in short selling NVIDIA.
MISPLACED CASE BY BARRON’S ON NVIDIA $NVDA
January 24, 2011
- NVDA has already licensed all of its relevant intellectual propert regarding GPUs tpo Intel. Intel has been slow, but when INTC catches up it will not be lacking GPU intellectual property.
- AMD has also missed the boat on the mobile processors, but through acquisition of ATI the GPU technology at AMD is at par with NVDA.
- AMD will either catch up in the mobile market or license its graphics intellectual property to the likes of TXN, MIPS and Qcom.
- With debut of INTC’s Sandy Bridge processor, NVDA will lose as much as 50% of its traditional high margin business.
- Barron’s does not show a good understanding of the lower gross margins in the mobile business.
- Barron’s drastically underestimates the competition that is coming to the mobile market.
- NVDA does not own its own CPU intellectual property, but licences it from ARMH. Licences from ARMH are available to NVDA’s competitors.
- NVDA is used to a duopoly with AMD in GPUs, now NVDA is entering into a highly competitive area.
The environment now reminds us of 70′s and early 80′s when there were numerous vendors in the general purpose microprocessor business. Ultimately only one architecture x86 prevailed. The point is look back at the history is instructive before becoming overly bullish on NVDA
INTEL $INTC TO PAY NVIDIA $NVDA $1.5 BILLION
January 10, 2011
Nvidia $NVDA trading has been halted. News is that Nvidia has signed a 6 years cross licensing agreement with Intel and Intel will pay $NVDA $300 million each in 5 annual installments. This amount is in the range of what was expected and in line with earlier settlement between $INTC and $AMD.
Since there is no surprise here, theoretically the stock price of $NVDA should not go up. But in this bull market, we expect a big up spike. We will take advantage of the up spikes by lightly adding to our short position. We suggest disregarding the levels in our prior post and using technicals to short at the top of the potential up spikes.
IRRATIONAL EXUBBERANCE ON NVIDIA $NVDA
January 8, 2011

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| Intel Sandy Bridge Processor |
Some exuberance on NVIDIA (NVDA) is justified based on the news that Dell (DELL) will use a NVIDIA core in its phone. We do not argue that this development may be a game changer if NVIDIA can muster design wins with popular phone manufacturers. But this is only a speculation at this point. After all, Dell is nobody in the cell phone business.
NVIDIA’s prospects in the tablet business are less speculative and certainly a reasonable reason for some exuberance. However, investors do not seem to be taking into account that this will be a lower margin business. Investors also seem to be drastically underestimating the depth of potential losses in the existing graphic chip business.
The strategy of Advanced Micro Devices (AMD) of integrating more and more graphics capabilities on x86 processor chips has been obvious since Advanced Micro Devices acquired NVIDIA’s main competitor, giving it a significant edge.
In a further development, our analysis shows that “Sandy Bridge†microprocessors from Intel (INTC) will significantly cannibalize stand-alone graphics chips from Advanced Micro Devices and NVIDIA. There are reports of a two-fold improvement in graphics, measured as frames-per-second rendering, versus the prior “Clarkdale†integrated graphics processor from Intel.
The “QuickSync†video trans coder in Sandy Bridge from Intel makes video processing twice as fast as the most expensive graphics chips from NVIDIA and Advanced Micro Devices.
As a result, the stand-alone graphics processing unit market will shrink by as much as 50%, which is a negative for Advanced Micro Devices and NVIDIA. Intel’s deal with studios to download movies is yet another negative for NVIDIA. Advanced Micro Devices is much better positioned than NVIDIA.
Investors in NVIDIA seem to have disregarded the most probable scenario – profits from the new business will roughly equal the loss of profits from the traditional business .
We will take advantage of this over-exuberance by starting to lightly scale in a short position in NVID1A on up spikes. We will get progressively more aggressive if the stock price goes higher.
SPECULATION ON ALTERA $ALTR IS NONSENSE
September 29, 2010
ALTR has been running up on the speculation of an ORCL buyout. As an electrical engineer, I am very familiar with the products of ALTR. There is no synergy between Altera’s products and Oracle’s strategy of acquiring semiconductor companies to enhance server technology. Possible buyout candidates include MIPS, AMD, ARMH and NETL.
We will start scaling in shorts on ALTR right here at $30.30 and add to the position on up spikes. Target in the range of $28.75 to $29.
