Esports, Social Media and Game Stream has been a huge blessing for the gaming industry of $ 138 billion, especially for NVIDIA (NASDAQ: NVDA) the best provider of graphics processing devices) for PC players.
The game segment is NVIDIA's largest growth driver, which accounts for 56.5% of subsequent 12-month revenue, and it's not going to slow. NVIDIA's game revenue exploded 162% between fiscal 2015 and fiscal 2018 (ending in January), as players have upgraded to more powerful GPUs to play the latest kinematic games on high-screen resolutions and compete online with other players.
Based on On some recent industry data, investors should expect the good times to keep rolling for NVIDIA's gaming business.
Gaming boom lifts all boats
In the last few quarters, the demand for graphics cards among PC players has not been a zero-game game, indicating a growing PC player base, which gives higher GPU demand for both AMD and NVIDIA .
In April-April, Advanced Micro Devices (NASDAQ: AMD) Q1 results report reported a steady 95% growth in its computer system and graphics segment. A few weeks later, NVIDIA showed that Team Red's winnings did not come at the expense of Team Green, while NVIDIA's gaming segments increased by 68% during the year, in line with the last few quarters.
Under managing director Lisa Su, AMD has returned to the discrete GPU market. Jon Peddie's latest research report for the first quarter showed that AMD's share of the supplementary board market increased to 34.9%, compared with 27.5% a year ago. However, after NVIDIA saw its market share fall from a high of 72.5% last year, it appears to stabilize in the mid-60% over the last few quarters.
However, Jon Peddie attributes AMD's recent gains to new products for workstations and encryption needs, unlike games, indicating that NVIDIA still has a good position with its line of GeForce graphics cards.
Players start upgrading to high-end cards
The monthly Steam hardware survey shows players not only sticking with NVIDIA over their rival but start trading up to pricier cards. For non-players out there, Steam is the most popular online store where PC players buy and download games. Every month, it takes a survey to find out which hardware users are running on their PC.
In accordance with Jon Pededy's market share data, NVIDIA GPUs spread the top of Steam's June 2018 survey of the use of video cards. Mid-tier cards like NVIDIA's GeForce GTX 1060 and 1050 Ti are at the top, but the percentage of users has fallen a few percent each month recently.
Meanwhile, high-end NVIDIA cards like the GeForce GTX 1070, 1080 and 1080 Ti have seen their usage increase a few percentage points in recent months. This indicates that players upgrade from mid-level cards to high-end cards, which gives higher NVIDIA gross margins.
In fiscal policy in 2018, NVIDIA's gross margin expanded 100 basis points to 60.2%, as demand for higher margin products such as playing cards continued to increase. In the first quarter, strong demand in the gaming segment continued to grow to 510 basis points in the quarter.
The GTX 1060 is about a $ 300 card, while 1080 has been in the $ 500 to $ 600 series lately. As players upgrade, NVIDIA's average sales prices will likely continue to increase, in line with the 11% annual increase the company has experienced over the last five years.
And there are still many players out there that have not upgraded. Only 30% of NVIDIA's installed base has upgraded to the latest Pascal generation of GeForce GPUs, such as those mentioned above. More players will eventually upgrade, especially with 4K games becoming more common and requiring more powerful cards.
The GeForce demand should remain robust
NVIDIA appears to remain the selected card for players by the end of this year. The company recently reported that active weekly users of GeForce GPUs increased 10 million over the last 8 months, as the company called a "huge increase."
The total installed base for GeForce players is around 100 million, which would make GeForce the most popular gaming platform, just before Sony s Playstation 4 game system, which has a base of 79 million.
One of the advantages of being a market participant is that gaming companies develop games that are to be optimized for NVIDIA's GPUs. It is clear that NVIDIA is the gold standard in space, 86% of esport players compete with NVIDIA hardware.
NVIDIA has controlled the majority of the discrete GPU market since March quarter 2005, and recent trends indicate that the line will not end soon.