NVIDIA’s gaming business

NVIDIA (NVDA) is a popular name in the PC gaming industry, as more than 95% of gaming enthusiasts use its GeForce GPUs (graphics processing unit) to get the ultimate gaming experience. Gaming is NVIDIA’s core market from where it earns more than 50% of its revenue.

NVIDIA to Benefit from PC Gaming Trends in the Long Term

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Factors driving gaming revenue

NVIDIA’s gaming revenue increases as more people become gamers because it is the leading GPU provider for PC gaming. Its gaming revenue also increases as existing gamers upgrade to higher-end GPUs, which increases its gaming ASP (average selling price).

At the Investor Day 2019, NVIDIA’s senior vice president of the GeForce business unit, Jeff Fisher, provided an update on how things are progressing in the gaming space. He stated that the number of GPU units sold and the ASP has increased at a compounded annual rate of 14% in the last five years. He added that this growth came as the increasing popularity of esports brought new gamers in the United States, China, and emerging markets.

PC Gaming trend

The growing popularity of esports is attracting big companies. Walmart (WMT) is bringing esports arenas to its stores, Disneyland Paris is hosting the Dota 2 esports tournament, and ESPN has created college esports championships.

Jeff Fisher supported his statements with some statistics. The number of gamers coming into PC gaming has risen ~30% in the last four years. Gamers are upgrading to a higher variant GPU as they need 5x more powerful GPU to play today’s PC games than the games released in 2014.

Jeff Fisher divided today’s PC games into two types, esports and AAA games, based on their GPU performance requirement. He explained that esports are competitive games that need faster response time due to higher FPS (frames per second). In Fortnite, gamers playing at 240 FPS win 2.5x more than gamers playing at 60 FPS. Thus, esports gamers demand GPU with 120 or higher FPS.

On the other hand, AAA games are designed to give cinematic experience and require high image quality, which can be found at 45 to 90 FPS. Thus, the latest esports titles and AAA games give gamers the motivation to upgrade.

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