Nvidia is a multinational technology company that deals with designing graphics processing units (GPU) for the professional and gaming markets. For the mobile computing and automobile market, the company designs system-on-chip units. In addition, it manufactures parts and products that enhance computer graphics for gaming and other media by utilizing artificial intelligence.
Currently, Nvidia has its eyes on the high-level application of Artificial Intelligence in various fields, including health care, car technology, deep learning, and autonomous machines. And whereas this concept was initially designed by Toshiba and introduced into the market by Sony, by reference to PlayStation, Nvidia highly revolutionized the GPU Concept.
This article covers the SWOT analysis of Nvidia, including both internal and external strategic factors. The internal strategic factors include strengths and weaknesses, while the external factors include opportunities and threats. Before jumping into the detailed Nvidia’s SWOT analysis, let’s go through the basic highlight of the company.
Nvidia – At a Glance
| Name | Nvidia |
| Website | www.nvidia.com |
| Founders | Jensen Huang, Curtis Priem, Chris Malachowsky |
| Chief Executive Officer (C.E.O.) | Jensen Huang |
| Tagline | Work hard and go home |
| Headquarters | Santa Clara, Calif. |
| Type of Corporation | Public |
| Year Founded | April 5, 1993; 28 |
| Revenues (2020) | US$16.675 billion (2021) |
| Key Products/Services | Graphics processing units, Chipsets Drivers, Central processing units, Tablet computers, Data processing units, TV accessories, and Laptops, etc. |
| Key Competitors | Advanced Micro Devices, AVGO, TSM, and INTC, etc. |
Nvidia’s Strengths
Innovation
Nvidia has transformed itself to being a global leader in foundational technologies like artificial intelligence, Virtual reality, and advanced robotics, among others. Innovation has given the company a strong technological foundation. From 1995, Nvidia launched its first product NV1, in 1999, it designed its GeForce 256 GPU and launched it in 2000, which was termed as the world’s first GPU, 2001 saw the company launch its first programmable GPU. With the nForce platform, the company was able to enter the integrated graphics market. It became the fastest semiconductor market to reach $1 billion marks in revenues and therefore joined S & P 500 companies.
In 2004 it launched SLI technology which would sharply increase an individual PC’s graphics power. It released CUDA architecture in 2006, launched the Tegra Mobile processor in 2009. It launched Fermi Architecture in 2008, powered the fasted supercomputer in 2010, launched Kepler in 2012, launched Tegra X1 with deep learning. Launched Volta in 2017, and Turing in 2018, launched Nvidia Ampere GPU architecture in 2020. This is a strength because continuous innovation ensures shorter product lead times, boosts efficiency, ensures the sustainability of the company, and ensures great customer satisfaction for more profitability.
Strategic Partnerships and Acquisitions
Nvidia has had strategic acquisitions for its product expansion. This is one of the most important means of growth for a company. It improves synergies and has Nvidia build more on the strengths of the companies it acquires for the greater advantage of Nvidia and its product offering. The company’s first strategic partnership was launched with SGS-THOMPSON, TSMC. It then acquired Graphics pioneer 3DFX and Media Q among others.
Strong Product Portfolio
Nvidia has a strong product portfolio that includes graphics, wireless communication, PC processors, and automotive hardware/software. This wide range of products gives Nvidia more leverage in defining and meeting particular customer needs and thereby improving its effectiveness in meeting customers’ wants and needs.
This demonstrates Nvidia’s great investments in research and development to ensure the company captures all the needs that are inherent in the market so as to launch products that appeal to the company’s audience
Strong Financial Performance
Nvidia has recorded remarkable financial results in the recent past. The first quarter of 2021 recorded an 84% jump in revenues from a year earlier, gaming revenue rose by a whole 106%, and data center revenues rose by 79% from a year earlier. Nvidia has a large asset base and a high return on expenditure.
The founder and CEO of Nvidia attribute this growth to strong demand for the company’s products. Additionally, the company found more opportunity for growth with the advent of COVID 19, which brought about a paradigm shift in how businesses operate, which brought a greater appreciation for Nvidia’s products and services.
Strong Brand
Recognitions and high rankings by various industry players is a mark of confidence in Nvidia as accompany and therefore goes a long way to not only confirm the competitive strengths that the company has but also endorses the company to the global audience for the various efforts the company is making to deliver on its promise.
Nvidia is enviably a strong brand with impressive recognitions and commendations from the market. Therefore, the company has received numerous nominations and awards for its outstanding performances in various spheres of business operations.
In 2021 alone, the company had the following rankings and recognitions: it was second-best among America’s Most Responsible Companies by News, it was position 4 among Top 50 Large-Cap Value Creators, it was position 12 in both 100 Best Companies to Work For, and BrandZ Top 100 Most Valuable Global Brands, it was position 86 in Brand Finance US Top 100 and position 100 in Global 100 Most Sustainable Corporations.
Strong Workforce
Nvidia has a highly skilled labor force that is diversified, with qualified and accredited professionals. The company is highly ranked in the industry for being the best place to work for.
Nvidia’s Weaknesses
Low Current Ratio
While the company has strong financial performance, the company’s financial ratios call for more effort to ensure safer margins. Nvidia has a low current ratio which may pose liquidity challenges in the event the company needs to meet its current financial obligations. The company’s rating is lower than the industry average. This could as well inch on the company’s cash flows.
Dependency on a Few Strong Products
While Nvidia has numerous products, not all the products are performing strongly in the market. A few of the products have a high market share. This makes the company vulnerable to any threats that could threaten the few strong products. The company needs to increase its innovation to strengthen the rest of the products.
High Operational Costs
Some of the areas have caused an increase in operational costs, including rental expenses. A good number of the company’s premises are rented properties instead of purchased properties.
Additionally, with the advent of COVID, there were increased complexities in logistics and costs thereof. This increased the operational costs for most companies and thereby inched into the profits margin of the company. Therefore, Nvidia needs to focus on cost-cutting measures to increase its profit margins continuously.
Nvidia’s Opportunities
Changing Trends
While the 21st-century customer keeps on evolving in their tastes and preference, each of the changes creates a new demand for products and services to meet the new paradigm. Additionally, the advent of COVID has created a shift in work practices that calls for new technological approaches. Nvidia has already reaped from this shift. There are more opportunities in this regard for Nvidia to explore.
Internet and e-commerce
With the internet becoming increasingly ubiquitous, more and more customers and finding it easy to make their purchases online, thereby giving a boost to e-commerce. Nvidia needs, therefore, to sharpen its online sales strategy to make the most of this growth.
Technological Advances
Increased technological advances characterize this century. These advances define innovation, sustainability, efficiency, and effectiveness, among others. While Nvidia has already invested heavily in technology, there are still more opportunities arising with every invention, and this calls for more alertness on the part of Nvidia to respond appropriately to technological changes in the market.
Nvidia’s Threats
Increased Competition in the Market
Nvidia faces strong competition from both direct competitors, indirect competitors, and new entrants into the market. Increased competition pushes down prices to the advantage of customers but to the disadvantage of suppliers as it cuts down on profit margins.
In the event this becomes unsustainable, Nvidia would be facing the threat of incurring losses and eventually have a foreclosure.
Constant Changes in Technology
New technologies pose the threat of rendering a product redundant and eventually become obsolete. Therefore, Nvidia needs to innovate to evade any such eventuality continuously.
Conclusion
Nvidia, by industry standards, is a leader. The company has invested so much in innovation and technology and so far is reaping greatly. However, the company needs to strengthen its products so that all of the company’s products perform strongly in the market to increase revenues to increase liquidity for the company.
