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Nvidia forecast shows gamers keep spending on expensive gear

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Nvidia Corp, the biggest maker of graphics chips used in high-end gaming computers, predicted sales that may top analysts' estimates, signaling that game players continue enthusiastically to seek the latest technology.

[SAN FRANCISCO] Nvidia Corp, the biggest maker of graphics chips used in high-end gaming computers, predicted sales that may top analysts' estimates, signaling that game players continue enthusiastically to seek the latest technology.

Revenue in the second fiscal quarter will be US$1.35 billion, plus or minus 2 per cent, the company said Thursday in a statement. That compares with analysts' average estimate of US$1.28 billion, according to data compiled by Bloomberg.

While personal computers are no longer upgraded as often as smartphones, the corner of the PC market that only cares about the latest games and performance is still growing. Spending on components that can cost as much as a standard laptop is buoying Nvidia's earnings and funding chief executive officer Jen-Hsun Huang's push to get graphics processors into new areas such as data centres and cars.

"That's really the driver. Am I excited about the next game?" said Craig Ellis, an analyst at B Riley & Co in San Francisco.

Mr Ellis said there's plenty of room to improve graphics processing and continue to fuel sales to those who want more performance.

Shares of the Santa Clara, California-based company rose 7.1 per cent in extended trading following the announcement after earlier closing at US$35.57 in New York.

Nvidia expects the interest in high-end gaming gear to grow. As games become more lifelike the demands on hardware are only increasing, said Mr Huang.

"They pay for it because they need it," he said in a telephone interview. "Gaming is not a niche - gaming is what hundreds of millions of people do."

Nvidia's gaming-related revenue surged 17 per cent from a year earlier to US$687 million in the quarter. Sales of chips for use in data centres outpaced those gains, growing 63 per cent to US$143 million. Mr Huang said he expects that division to continue to grow at a fast rate and anticipates it possibly becoming the company's largest end market.

Net income in the fiscal first quarter, which ended May 1, was US$196 million, or 33 US cents a share, compared with US$134 million, or 24 US cents, a year earlier.

Profit, excluding certain costs, was 46 US cents a share, compared with analysts' estimates of 41 US cents. Sales rose 13 per cent to US$1.31 billion, against estimates of US$1.26 billion.

Global PC shipments dropped 9.6 per cent in the first three months of the year, the sixth consecutive quarterly decline, according to market researcher IDC. The drop took unit sales to their lowest level since 2007.

Under Mr Huang, Nvidia has branched out into new markets, including servers, auto and new applications such as virtual reality and artificial intelligence, though the company still gets a portion of its revenue from the shrinking notebook business.

BLOOMBERG