I get asked questions often about NVIDIA in my industry work so I figured I’d focus today’s column on my take on the company. NVIDIA took a lot of investors by surprise as their stock price has increased from around $20 in 2015 to $161 at the close of business August 18th, 2017. That’s a 705% increase in just two years. Many of us who study the semiconductor industry knew NVIDIA was well positioned beyond just PC gaming, but most investors only viewed them as a PC gaming company and concluded that market was not that large even though it was lucrative.
In the time since 2015, NVIDIA has convinced the world the GPU is a central part of the future of computing with far-reaching applications into data center, machine learning, artificial intelligence, computer vision, cryptocurrency mining, and of course gaming. The opportunities to leverage the power of GPUs for new applications only helps to increase the demand and addressable market for GPUs broadly. I’ve said many times publicly and privately that the GPU is and will remain for some time one of the most important technologies in the modern era of computing.
However, with all the buzz for NVIDIA around things like machine learning, AI, cryptocurrency, and more, it is important to recognize they are still a major part of a resurgence of growth category in PC gaming.
As we look at the PC market overall, one of the standout observations we continually see is the strength of a segment of the PC landscape which is PC gaming. Many main PC OEMs have identified the PC gaming category as an emerging growth sector as more and more consumers catch onto the benefits of PC gaming both in hardware and software. As we watch the potential for the PC market unfold it is important to recognize NVIDIA’s dominance in this category.
NVIDIA provides a significant amount of developer tools in their GameWorks SDKs and these tools are implemented in 70-80% of all the top PC gaming titles. Combining all of this and I think an interesting observation stands out. When we think about gaming platforms, we usually say there is XBOX, PlayStation, and PC. But you can make a strong argument that NVIDIA’s GeForce platform is the true third gaming platform. GeForce is the majority leader in graphics cards. Just like XBOX and PlayStation provide software advancements and SDKs for developers, so does NVIDIA with GeForce. As NVIDIA brings new tools to market the top games adopt and implement in their software, allowing gamers with GeForce cards to benefit from those innovations and increase their gameplay experience.
Two recent examples of this are announcements from the Gamescom conference where two major PC gaming titles are announcing integration with GeForce technologies. The extremely popular new game called PlayerUknown’s Battlegrounds (PUBG) is implementing NVIDIA ShadowPlay Highlights which lets gamers automatically capture their gameplay to share. I’ve been tracking this game for a while as it is a fascinating story, but it started as a user-created MOD and has since grown to over 7 million players in just four months. This game also recently became only the second game in history to pass 600,000 concurrent players on Steam. In PC gaming circles this game is not just hot but spreading like wildfire.
NVIDIA and Square Enix also announced Final Fantasy XV Windows Edition at Gamescom, and that it will also be including seven proprietary NVIDIA Games Works technologies in this upcoming release. Proving again how top publishers integrated proprietary NVIDIA technology and adding weight to the GeForce gaming platform.
Related to PC gaming, and NVIDIAs overall upside, I want to make one other point. I recently acquired some data that could signal an early indication that PC gaming could grow to new heights. There was a recent sales uptick of PC gaming rigs, and a client was interested to know what caused the uptick. Upon interviewing those who purchased these new hardcore gaming PCs, what was discovered was the vast majority of these buyers were converting to PC gaming from consoles. Simply put, console gamers are starting to see the benefits of PC gaming and are switching from consoles to PC.
If this becomes a trend, it could be significant. PC games are always running the latest and greatest technology in both hardware and software. PC game publishers tend to experiment and push the limits more on PC games. But perhaps the biggest reason console gamers may be catching on is because the PC gaming community is much more compelling with online play. Games on PC have much larger worlds and can support hundreds of players on the same map to sometimes thousands. Making for much more exciting and competitive online game play. Word is spreading about the community of PC gaming, and I sense many more console converts in the future.
The more time I’ve spent thinking about the future of game consoles like XBOX and PlayStation, the more convinced I am that these devices in the future will look and function more like PC gaming systems due to the unparalleled advantages of PC gaming. If my hunch is correct, few companies stand to benefit from this than NVIDIA.