Nvidia scored a win when it got Nintendo's nod to have its Tegra processor to power Nintendo's coming hybrid game console, the Nintendo Switch.
Given that previous effort of Nvidia to garner a spot in any leading gaming platform until now, the partnership is significant for the company. Major gaming companies prefer using AMD's GPU to power their consoles, even Nintendo used AMD for the Wii U, according to Forbes.
One major significance is that Nintendo Switch is the only current gaming console that employed Nvidia to power it. Nvidia Tegra is the designation of Nvidia's effort to penetrate the mobile industry in devices such as tablets and smartphones. The Nintendo Switch is a hybrid that converts from a console to a tablet form. But the fear serious console gamers are saying is that it might not be powerful enough as the Xbox or the PS4.
According to Nvidia, the Nintendo Switch uses a custom built Tegra processor. They boast that the one used in the Switch is a high-efficiency scalable processor that includes an NVIDIA GPU that is based on the same architecture used in top-performing GeForce gaming graphic cards.
Not only is the Nvidia Tegra used in the Switch is a customized version it also employed custom software including a revamped physics engine, libraries, advanced game tools. Inclusive is a new set of API's said to harness this performance.
Financially, the success of the Nintendo Switch will drive earnings for Nvidia to increase. Currently, Nvidia's revenue for the Tegra as of September is forecasted to increase from $559 in 2015 to $1.75 billion. Tegra-powered DRIVE and SHIELD (Nvidia's gaming device) currently represent the majority of this revenue. What more if Nintendo Switch becomes a hit?
Business wise, with lined up prospects including that in the automotive industry, the company is undervalued merely by underestimating the growth potential of its Tegra line of processors. Forbes estimates that if Tegra increases its revenue yield to $2 billion and manages to improve EBITDA margins up to 30 percent, the valuation of the company would increase by a margin of more than 20 percent.
Nintendo Switch might just be the ticket for Nvidia to tip the scale, so to speak.
