Graphics chipmaker Nvidia forecast higher sales for the current quarter and said its mobile business would take off next year when tablets and smartphones will use its Tegra chips.
Nvidia is moving into the fast-growing mobile business, combining low-powered processors designed by ARM Holdings with its own Tegra brand graphics processors for mobile devices.
"Tegra is what makes or breaks the stock going forward," said Patrick Wang, an analyst at Wedbush Securities. "When you think about what the handset and tablet markets are, those are consumer-centric markets, and with consumers it's either hit or miss."
The company, which specializes in high-performance graphics cards favored by gamers, is diversifying as Advanced Micro Devices and Intel Corp prepare to launch microchips next year that combine traditional core processors with graphics processors.
Mobile devices using Google's Android operating system and Nvidia's Tegra chips will be released early next year, Chief Executive Jen-Hsun Huang told analysts on a conference call.
"Our Tegra business should be quite large. It'll be one of our largest businesses over time," he said, adding that mobile chip sales will help push Nvidia's gross margins above current levels of around 46 percent.