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NVIDIA (NVDA) Pushes the Limits in Gaming With RTX SUPER GPUs

Zacks Equity Research

NVIDIA NVDA recently launched Turing-based gaming cards — GeForce RTX 2060 SUPER, GeForce RTX 2070 SUPER and GeForce RTX 2080 SUPER — to make real-time ray tracing more accessible.

The GPUs are expected to deliver up to 25% faster performance than the current versions.

The company stated that RTX 2060 Super and RTX 2070 Super cards will be launched on Jul 9 while RTX 2080 Super card on Jul 23.

The launch of the latest gaming GPUs is expected to help NVIDIA expand its customer base and drive additional revenues. Moreover, the company’s well-timed move is likely to strengthen its competitive edge against the likes of Advanced Micro Devices AMD, which is launching Radeon 5700 XT gaming card in July.

Real-Time Ray Tracing: A Game Changer

NVIDIA’s Turing GPU and its real-time ray tracing technology are witnessing a massive adoption. The company had earlier announced that more than 20 partners including Adobe, Autodesk, Dassault Systèmes, Pixar, Siemens, Unity, Unreal and Weta Digital et al support its RTX platform.

The rising momentum in the games backing the ray-tracing feature is a positive. Further, to propel a wider uptake, NVIDIA enabled ray tracing backup to several GeForce GTX GPUs, which is likely to lend developers a large installed base of gamers.

The company is also benefiting from the adoption of real-time ray tracing in the professional visualization markets. Reportedly, RTX has been welcomed by more than 80% of film studios and 3D application providers.

NVIDIA Banks on Gaming Business

NVIDIA has always generated substantial revenues from its cards because of the significantly higher functionality. However, it has been hit by a deteriorating trend in its gaming business over the last few quarters. Reduction of GPU channel inventory following tepid demand from crypto miners is a persistent overhang.

However, the company is gaining traction from the growing sales of Turing-powered GPUs. To this end, the launch of mid-range GeForce products is a tailwind. In fact, strong demand for the gaming laptop is an upside for the company.

Per a Newzoo report, the gaming market is projected to reach $174 billion by 2021 from $134.9 billion estimated in 2018.

Additionally, per IDC data as confirmed by DisplayDaily, worldwide market for gaming desktops, monitors and notebooks is projected to grow 8.2% on a year-over-year basis and touch the figure of 42.1 million devices to be shipped in 2019.

Notably, growth in the gaming hardware market is bumping up demand for graphics processors as well. Per Allied Market Research, the GPU market is anticipated to scale $157.1 billion by 2022 at a CAGR of 35.6% from 2016 to 2022.

We therefore believe that the product ramp-up will stimulate NVIDIA’s growth prospects and leverage its competitive position in the graphics market.

NVIDIA Corporation Revenue (TTM)

NVIDIA Corporation Revenue (TTM)

NVIDIA Corporation revenue-ttm | NVIDIA Corporation Quote

Zacks Rank & Stocks to Consider

NVIDIA currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Rosetta Stone RST and j2 Global JCOM, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Rosetta Stone and j2 Global is currently projected at 12.5% and 8%, respectively.

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