JP Morgan believes Nvidia will beat its Q1 revenue and earnings estimates due to strength in the chipset segment, stabilizing channel graphics inventories and strong workstation graphics revenues.
Analysts are, however, concerned about Nvidia's long standing dispute over Intel chipset licensing. Intel is still challenging Nvidia's right to offer chipsets for Intel's new series of CPUs with integrated memory controllers, such as its flagship Core i7 Nehalem based CPU. High inventories and a larger share of low margin entry-level chipsets are expected to impact Nvidia's margins in the chipset segment. Chipset sales currently account for about 20 percent of Nvidia's revenue, and analysts expect margins to drop from 40 to 38 percent. Long term sustainability of such margins and revenues is questionable unless Nvidia resolves its dispute with Intel.