Needham & Co.’s Rajvindra Gill got in touch by phone today to clarify his stance on Nvidia (NVDA) after I mentioned his downgrade of the stock yesterday in the context of a jump up in Nvidia shares.
As I noted yesterday, Nvidia’s stock is responding positively to data from last quarter showing it had a big jump in graphics processing unit (GPU) market share versus Advanced Micro Devices (AMD) in Q2.
Gill writes that he’s concerned not about notebooks but about desktop graphics sales. Data from the same research firm, Mercury research, show that total desktop discrete graphics sales declined by 15% in Q2. Nvidia’s share of the market was roughly unchanged in the quarter.The concern Gill has is that as Intel (INTC) moves its “Sandy Bridge” family of processors to the next iteration, “Ivy Bridge,” the gap between Intel’s integrated graphics on the desktop and what Nvidia and AMD achieve with discretes will narrow, making desktop discrete graphics more vulnerable.
“The next version of Sandy Bridge will offer a dramatic improvement in the relative power and a drop in the power consumption ” versus discrete parts. For that reason, he sees desktop discrete graphics as still being at risk. Overall, “attach rates” for desktop GPUs are going down over time, not up, he argues.Gill thinks the bump up in notebook discrete graphics sales on the back of Sandy Bridge shipments is temporary, and that over time, notebook discrete graphics are also at risk in general.