As the PC sales started slowing down, graphics processor manufacturer Nvidia increased its focus on alternate revenue streams. In the last few years, the company managed to grow its Tegra business significantly, increasing revenue from $198 million in 2010 to $579 million in 2014, mainly driven by increasing adoption of Tegra chips in mobile phones. However, the company’s Tegra operating margins declined drastically during this period as mobile computing is an R&D intensive business. Nvidia wound down its Icera baseband business last year and has shifted its focus on automotive and gaming, to drive growth in the Tegra division. It derives majority of its Tegra revenue from the automotive segment, and we believe that an expanding footprint in the automotive space will help Nvidia increase its Tegra revenue base and profitability in the long-run.

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