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Nvidia gains mobile-chip luster

Nvidia's settlement with Intel and its tablet-centric Tegra chip are making an impression on Wall Street. Is Nvidia becoming a mobile-chip leader?

Nvidia's $1.5 billion settlement with Intel on Monday and its drive to become a leader in the smartphone and tablet market seems to be playing well with Wall Street. Can Nvidia, a relative upstart in mobile chips, maintain this momentum?

The company's stock jumped about 15 percent today and the share price has doubled in three months. So, the burning question is whether this makes the longstanding PC graphics chip supplier, a relative newcomer to the smartphone- and tablet-centric ARM chip market, a small-device leader? The company's Tegra chips have been adopted by Motorola, for example, in high-end smartphones and the Xoom tablet. And LG is bringing out a 4-inch-class phone with the chip, too.

"They definitely did a good job with designs this year coming out of CES, seeing how many tablets are built around Tegra and high-profile smartphone wins," said Doug Freedman, analyst at Gleacher & Company, in a phone interview today. "The concern is how well those products are adopted by customers and consumers," he added.

And Nvidia's plans don't stop at mobile chips. At CES, it made a splash announcing a project to build ARM chips that span from the desktop to supercomputers in conjunction with Microsoft's announcement to move its next release of Windows to ARM processors.

"The fact that Windows is moving to ARM in 2012, 2013, and the fact that [Microsoft] Office is going to move to ARM, there's no doubt that opens up tremendous potential," said Freedman.

But he has some concerns, too. "Is the market overly enthusiastic? Are they [Nvidia] going to convert the market to PCs? Are they going to sell ARM processors for $100? What's the business model?"

Freedman also pointed out that Nvidia is by no means alone. Large, experienced mobile-chip suppliers like Texas Instruments and Qualcomm stand as formidable rivals. Both of those companies' chips are used widely in smartphones today.