Digital media processor and related software maker, NVIDIA Corporation (NVDA), recently declared the addition of new research and educational centers to address issues relating to the processing power of its graphics processing units (GPUs).
 
The company’s Computer Unified Device Architecture (CUDA) research centers are recognized institutions that use GPU computing for its various research projects. These CUDA centers facilitate the process of collaboration between different research groups situated at different universities that use the parallel computing procedure.
 
Through CUDA, developers gain access to the processing power of GPUs in a C language environment. Moreover, CUDA is compatible with NVIDIA’s installed base of GeForce 8 GPU series. This is the new mode of operation for NVIDIA GPUs that harnesses their computational power for use in other computation-intensive applications. (Since GPUs have many processing cores as against two to four for most CPUs, they have greater processing power and can therefore tackle more intensive processing operations.)
 
Since CUDA’s launch in 2007, a number of developers have introduced applications utilizing the improved processing power, including advanced financial modeling, generic drug modeling, semiconductor design and even weather forecasting models. This technology is expected to improve margins and increase NVIDIA’s market share, thereby providing a competitive edge to the company.
 
Another positive for NVIDIA’s GPUs is the increasingly visual computing environment. As a result, software is increasingly depending on visual user interfaces rather than text. For instance, Windows 7 requires much more graphics resources than its predecessor, as it leverages improved graphics capabilities to enhance user experience. This will subsequently boost the demand for graphics cards and bring more business to the company.
 
NVIDIA has reported mediocre second quarter numbers, falling short of expectations. However, better cost management and a slow revival in demand for graphics chips, keeping pace with the improvement in PC and laptop sales are positives. The company is also introducing new products at regular intervals thus attracting additional customers.
 
This apart, it seems that the long drawn legal battle with Intel Corp. (INTC) will likely move in favor of NVIDIA. On the other hand, performance will likely be tempered by cyclical weakness, exposure to Europe and increased competition. Additionally, the increasing expenses on research and development may put some pressure on margins going forward and a revival in demand in the GPU segment will take some time.
 
We have a Neutral rating on the stock; with a short term sell rating (Zacks rank #4).
 
INTEL CORP (INTC): Free Stock Analysis Report
 
NVIDIA CORP (NVDA): Free Stock Analysis Report
 
Zacks Investment Research