Virtual reality hype helps Nvidia sell more graphics chips for high-end PCs

Graphics chip maker Nvidia said that it saw an increase in game and virtual reality-related graphics hardware sales in the fourth quarter as consumers prepared for the coming launch of virtual reality headsets this year.

The Nvidia executives made the comments today in a conference call with analysts, and it was consistent with their hope that virtual reality could drive a wave of technology upgrades for computer owners. VR headsets such as the Oculus Rift, which launches later this year, require a great deal of graphics power, and the company’s research indicates that many are not ready to run virtual reality. Nvidia’s results are also a bellwether for the PC industry, as the company is one of the largest makers of graphics chips. Its results are also indicators of the health of sectors such as PC gaming hardware, graphics-enhanced data center computing, and car computing.

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The PC market isn’t growing like it once did, but Nvidia still did well. Chief financial officer Collette Kress said in the conference call that Nvidia’s graphics processing unit revenue was $1.18 billion, up 10 percent from a year ago. CEO Jen-Hsun Huang said that Nvidia’s growth drivers including gaming, virtual reality, A.I. and self-driving cars.

VR is likely a very small part of that, but it offers some hope for growth as the PC struggles to grow amid sales of smart phones and other gadgets. Gaming revenue was up 21 percent from a year go, thanks in part to interest in virtual reality and strong sales of holiday games. Data center revenue was up 18 percent from a year ago.

The Santa Clara, California-based company reported non-GAAP earnings of 52 cents a share on revenue of $1.4 billion. Analysts had expected non-GAAP earnings of 32 cents a share on revenue of $1.31 billion.

“Gaming is a $100 billion business,” said Huang. “We can grow by introducing new game platforms. The installed base of 100 million GeForce gamers in the world has a chance to upgrade when that happens.”

Back in December, Nvidia said that there were only 13 million PCs, or 1 percent of the world’s computers, that had adequate graphics to handle VR. Nvidia says it can extend that number to 25 million if the VR game makers use Nvidia’s Gameworks VR software, which makes the VR processing more efficient.

If VR takes off, consumers are going to find they have to buy new PCs to run VR apps. And that could potentially help Nvidia sell more graphics chips.

Kress said that the company is working with 70 companies working on self-driving vehicles. Nvidia announced at the Consumer Electronics tech trade show in Las Vegas in January that it would launch an Nvidia Drive PX supercomputer for the car.

“The big killer app that we are beginning to see is deep learning,” Huang said.

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Nvidia now has $5 billion in cash. Nvidia said that some of the PC gaming hits of the holiday season (no surprise) were Rainbow Six Siege, Fallout 4, Star Wars: Battlefront, and Call of Duty: Black Ops III.