NVIDIA’s Tegra business
NVIDIA (NVDA), which earns more than 80% of its revenue from GPUs (graphics processing units), is expanding the application of these GPUs in verticals beyond gaming. The company has also renewed its focus on a second product, its Tegra SoC (system-on-chip), which is a low-power processor for devices needing power efficiency.
Tegra SoCs, originally planned for tablets, failed to compete with Qualcomm’s (QCOM) ARM-based low-power Snapdragon processors. NVIDIA has now expanded the application of Tegra beyond the SHIELD platform for TVs to game consoles and the DRIVE autonomous car platform.
In fiscal 2018, NVIDIA’s Tegra SoC powered Nintendo’s Switch game console, boosting NVIDIA’s earnings. NVIDIA’s Tegra revenue rose 86% YoY (year-over-year) to $1.5 billion, largely driven by strong demand for Nintendo’s Switch game console. After using NVIDIA’s Tegra, Nintendo’s Switch game console sales skyrocketed, threatening Advanced Micro Devices’ (AMD) dominant position in the market.
In automotive, NVIDIA’s DRIVE platform features both Tegra SoC and DGX GPUs, making NVIDIA’s technology the most advanced in autonomous driving. However, Intel (INTC) is following fast with Google’s (GOOG) Waymo using its CPUs (central processing units) to power autonomous cars.
Autonomous cars, still in the development stage, could take two to three years to go mainstream. Once the autonomous vehicle trend picks up, Tegra’s revenue contribution could increase significantly. Next, we’ll look at NVIDIA’s profitability.
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