That’s according to RBC Capital Markets analyst Mitch Steves who said this week Nvidia could make $300 million to $400 million in its fiscal year 2018 all because of the Switch game console. In a research note to clients covered by Yahoo Finance, the analyst said Nintendo will double production of the Switch console to 16 million units from 8 million units, creating a situation when Nvidia earns even more off of the game console.
“We think the incremental 6-8M units could add $300-400M to the top line (3-4% growth to annual revenue on a $50 ASP),” wrote RBC Capital Markets analyst Mitch Steves according to Yahoo Finance. “This is a notable metric given that the Wii U sold ~13.5M units since its release in 2012 and 10M+ in the first 12 months are unlikely reflected in current estimates.” Nvidia makes a customized Tegra X1 chip for the Switch device. (See more: Nintendo Sold Close to a Million Switch Systems in March)
Ever since Nintendo rolled out the much anticipated Switch game console, which is a portable gaming system and home console rolled into one, it has been selling out all over the globe. Nintendo Switch uses a dock when it functions as a console. It switches to portable mode when lifted out of the dock. The strong response to the device has prompted Nintendo to increase the number of units produced with the Wall Street Journal reporting in March that companies that assemble the Nintendo Switch plan to manufacture 16 million more units. Originally, the plan was to assemble 8 million units.
In March alone, Nintendo said it sold close to 1 million Switch units in the U.S. The Japanese game maker said the Switch has sold faster at its launch than any other video game system in the company’s history, which bodes well for Nvidia and other component suppliers.
While Nvidia has long been one of the leading graphic chip makers, concerns about saturation in its core market have been cropping up. (See more: Is the Nvidia Growth Story Over?)
In an effort to move beyond the PC and gaming markets, Nvidia has been branching into new areas the past couple of years such as providing chips for the automotive market, data centers and for artificial intelligence. AI may be a big growth opportunity for Nvidia as the burgeoning technology starts to get adopted more by the masses.