NVIDIA Corporation (NVDA) Smiles From the Sidelines of the Console Wars

As the gaming console wars rage on for yet another generation, NVIDIA Corporation (NASDAQ:NVDA) is sitting on the sidelines as Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT) take shots at each other.

Microsoft Corporation (NASDAQ:MSFT) is being universally derided by both gamers and the media over its decision to allow restrictions over used games, as well as for its online requirement, where the new Xbox One has to check in to the company’s servers daily. When Sony Corporation (ADR) (NYSE:SNE) announced this week that the PlayStation 4 was sticking to the traditional model of used games and offline gaming, it received massive cheers. That response bolstered Sony Corporation (ADR) (NYSE:SNE)’s confidence, and the Japanese company has now boosted its sales forecasts for the upcoming console.

NVIDIA Corporation (NASDAQ:NVDA) is not participating in gaming consoles this generation. It powered the graphics in the PlayStation 3, but the company said it decided to pass on the PlayStation 4 because Sony wasn’t offering enough money. Rival Advanced Micro Devices, Inc. (NYSE:AMD) is powering both the Xbox One and PlayStation 4 as a result.

However, NVIDIA Corporation (NASDAQ:NVDA) isn’t too concerned with missing out on this generation. In fact, NVIDIA exec Toni Temasi is “glad” that the new consoles are about to launch, since it will “raise the bar” with gaming. The exec takes the opportunity to point out that NVIDIA Corporation (NASDAQ:NVDA)’s GeForce GTX Titan offers 2.5 times the performance of the PlayStation 4. The next generation of consoles could help spur demand for gaming PCs, even though the new consoles will actually close the performance gap with NVIDIA Corporation (NASDAQ:NVDA)’s graphics cards (the previous generation GTX 680 had 13.2 times the performance of the PS3).

The key will be developers. Since the performance gap is smaller, it will be easier for developers to scale up their content from console games to PCs. Developers will have an incentive to broaden their reach with less developmental effort than in previous generations. That may increase the amount of gaming content available for PCs.

As paradoxical as it sounds, passing on next-gen consoles may still help NVIDIA Corporation (NASDAQ:NVDA) yet.

The article NVIDIA Smiles From the Sidelines of the Console Wars originally appeared on Fool.com is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, has no position in any stocks mentioned. The Motley Fool recommends NVIDIA. The Motley Fool owns shares of Microsoft.

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