Nvidia reels as ATI grabs market share

Graphics-chip manufacturer Nvidia ( NVDA ) is suffering through a rough week.

The company announced Wednesday that it expected its chip sales to be weak in the second quarter, due to sluggish demand from China and Europe. Also weighing on results, Nvidia warned, were high memory costs.

Some computers come equipped with graphics chips integrated into their motherboard; these systems are less profitable for graphics processing unit companies like Nvidia and ATI - now owned by AMD. Integrated-GPU PCs may be growing in popularity and pressuring Nvidia's earnings.


Investors may be worried further by the news that Nvidia is losing share to ATI. In the first quarter, the former held 19.7 percent of the GPU market, while the latter occupied 24.4 percent. Intel ( INTC ) made up the difference.

This week, Apple ( AAPL ) announced that it was revising its desktops - and one of the changes is a shift from Nvidia GPUs to those made by ATI. Apple's share of the desktop market is small, but the change to ATI graphics chips could signal further share erosion for Nvidia.