Can anyone make a good, rational case for why NVDA should have almost twice the market cap of TDFX?
Ok, here is a case. The history of the graphics industry is that in each generation of chips, only the performance leader makes any money. Everyone else is reduced to competing on the basis of price, which robs them of any hope of real profit.
When SIII was king of the hill, it had a market cap of $1B. But, the industry shifted from 2D to 3D and SIII failed to make the transition, and its market cap dropped to less than $100M. Today after a long slow recovery, and on rumors of a high end 3D part coming soon, the stock is still only at $600M.
When TDFX was the undisputed king of 3D, it had a market cap as high as $850M. Today, there are worries that TDFX's technology is starting to look dated compared to NVDA, and that this trend might become even more pronounced when NVDA releases their next part. On the basis of these fears, TDFX's market cap is slipping, down to $350M now.
God help NVDA if it ever starts to lose its technological lead.
-Mike |
