Nvidia, Applied Materials see riches in their niches

Chipmakers and the companies that make the stuff that chipmakers use to make their chips are not always in the tech spotlight. But without them, you’re not going to be able to get much use out of your iPhone or any other gadget that you use to get online.

Semiconductors are, in a way, a niche industry, and within that niche, there are even more niches. And to use a rhyme that might sound like it came from a Disney film, niches have riches. Which brings us to Nvidia and Applied Materials.

Nvidia made its name in graphics chips, and Applied Materials is the world’s largest chip-equipment maker. Still, these are names that are not in public eye as much as, say, Facebook, Netflix or Amazon.

But investors who have bought Nvidia or Applied Materials shares this year might just be shouting those names from their local rooftops. Nvidia’s shares have risen 34.5 percent this year, while Applied Materials is up by more than 21 percent. Based on those performances, Nvidia and Applied Materials are the two best-performing tech stocks included on the S&P 500 Index.

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Those gains are likely helped by how both companies have built up their niches of the chip sector. Nvidia has found new markets for its products in industries that need to figure billions of calculations a second. Its products are used in high-end cloud-based devices from the likes of IBM, and it is also helping to power virtual-reality technologies used to simulate a trip to Mars.

Nvidia has seen the results of its newer initiatives in its quarterly performance. On May 1, Nvidia reported a fiscal first-quarter profit of $196 million,or 33 cents a share, on $1.31 billion, up from earnings of $134 million, or 33 cents a share, on $1.15 billion in sales in last-year’s first quarter.

Applied Materials, meanwhile, has benefited from the growth in consumer demand for everything from OLED displays used in phones and TVs, to 3D NAND memory chip technology. As more electronics makers see demand rising for such products, Applied Materials has seen its business in such areas increase. When the company reported its fiscal second-quarter results on May 19, earnings rose to $320 million, or 29 cents a share, on $2.45 billion in sales, compared with earnings of $364 million, or 29 cents a share, on revenue of $2.44 billion in the same period a year ago.

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But it was new orders that showed the company is on the right track. Applied Materials said it recorded $3.45 billion in new orders during the quarter, a 37 percent increase from a year ago.

With its niches paying off, Nvidia and Applied Materials are finding more riches coming their way.

(HT to Fortune)

Photo: Nvidia’s Drive PX computer prototype. (Courtesy: Nvidia)


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