Nvidia Riding High on Increased Market Share

Computer hardware maker Nvidia (NASDAQ:NVDA) +3.25% stock is shrugging off a downtrodden tech sector (NYSE:XLK) in trading so far, making it the top gainer on the S&P 500 (NYSE:SPY) at last check. Driving the gains behind the surge in ticker price are reports that the company has upped its market share in both PC and Notebook sectors. “Nvidia gained 8.9 points of notebook discrete [graphics-chip] share to 50.6%. Overall, Nvidia gained 3.8 points of share to 54.6%,” writes UBS (NYSE:UBS) analyst Uche Orji. The news is welcome to Nvidia shareholders that have watched the stock drop 7.27% in 2011. The company likely stole market share from competitor AMD, who did not make any gains in the same period, say analysts, due to a change in business strategy since its acquisition of ATI Technologies.

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Another analyst, Jefferies’ Mark Lipacis, argues that long-term trends, especially the push toward more power-efficient PCs, may work against the graphics chips (NYSE:SMH) specialist.

“We expect Intel Corp. (NASDAQ:INTC) and Advanced Micro Devices (NYSE:AMD) to increasingly focus on notebooks with longer battery lives, lowering power consumption by about 50% over the next two years,” Lipacis wrote in a note. “We believe that lower notebook power limits would make it increasingly difficult for [manufacturers] to fit power-hungry discrete [graphics chips] in their notebook designs, representing a secular headwind for Nvidia and AMD’s notebook discrete [graphics chip].”