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Can NVIDIA sustain the growth of Q1 2014?

NVIDIA had a solid first quarter of 2014, but can it sustain this level of growth?

NVIDIA’s first quarter earnings for its fiscal 2014 year came in stronger than expected with the chipmaker reporting earnings of $77.9 million on $954.7 million in revenue.

Analysts were expecting NVIDIA to post revenue of $941 million.

Breaking down NVIDIA’s earnings, revenue from gaming GPUs was up 24% while revenue for Tegra was down 50% over the previous quarter and 22% year-over-year.  For the next quarter, the company expects revenue to be in the range of $975 million.

While these revenues, particularly from the consumer GPU division are impressive, one should consider that many parts of NVIDIA’s strategy haven’t really taken off. Its consistently hyped Tegra division, both in current-gen and next-gen forms, has been decimated by Qualcomm’s Snapdragon chipset and both of the next-gen gaming consoles will be packing AMD silicon.

This leads to the question, what exactly is NVIDIA trying to be? It bills itself as a gaming and mobile company primarily, but in reality its most secure business units are in servers and HPC. Granted, their gaming GPU division has double-digit growth but should the decline in PC market becomes more pronounced it won’t be maintaining twenty-something growth rates.

Ask NVIDIA what it is doing to insulate itself against this possible decline and the company will respond with drunken enthusiasm. “The PC as a platform for gaming is quite vibrant,” the company’s CEO, Jen-Hsun Huang, is quoted as saying in an interview.

Given Huang’s rock star persona – quite the contrast to AMD’s bookish stage presence – any market condition is bound to be shifted into how the company is about to shepard in the next-great revolution in computing. Shareholders are happy, the company is doing well financially, but whether it can insulate itself against a resurgent AMD, Qualcomm dominating the mobile sphere, and a decline in the PC gaming market has to be answered with more than Huang’s ecstasy for being on stage.

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