China’s growth is a positive sign for NVIDIA’s growth

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PC Gaming segment continues to post positive growth

Recently, the PC industry as a whole recorded a steady decline. However, a lower-than-expected decline in this segment was positive for Intel (INTC) and AMD’s (AMD) investors. These companies dominate the PC processor market.

For NVIDIA’s (NVDA) investors, growth in the PC Gaming segment was a positive sign. The company recorded a 10% and 13% year-over-year (or YoY) and quarter-over-quarter increase in its graphics processing unit (or GPU) sales. The increase was mainly due to higher revenue from its GeForce graphics chips. The graphics chips are targeted to high-end gamers.

Revenue by geography

The majority of high-end gamers use desktop machines. According to Forbes, PC gaming makes up ~40% of the worldwide gaming market. This is much higher than consoles, phones, tablets, or any other individual gaming segment.

NVIDIA claims that its GeForce GTX GPU delivers performance that’s comparable to the latest generation consoles. If this is true, the GeForce gaming PC will become the biggest target for the latest generation game developers.

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Rapid growth and consolidation

In September, Microsoft acquired Minecraft. Minecraft is an online game that’s accessible on all platforms—including Apple iOS (AAPL), Google (GOOGL) Android, and Sony PlayStation. It’s also available on Xbox and PC.

Amazon announced the acquisition of Twitch Interactive Inc. in September. It’s a video game streaming website. So far, it’s the company’s most expensive acquisition. Microsoft’s CEO, Satya Nadella, said “Gaming is a top activity spanning devices, from PCs and consoles to tablets and mobile, with billions of hours spent each year.”

Asia is expected to drive online gaming industry growth

Asia is expected to play an important role in global mobile and online games’ revenue growth. More than 50% of the global growth is expected to come from Asia—32% in China, 12% in South Korea, and 10% in Japan.

As the above chart shows, NVIDIA gets most of its revenues from China and Asia Pacific. Combined with the bright gaming industry prospects in Asia, this means plenty of growth opportunities for NVIDIA. As a result, China’s growth is a positive sign for the company.

To learn more about the gaming market in Asia, please read Market Realist’s series, “A lucrative sector: Why you should look to Asia’s gaming markets.”

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