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NVIDIA’s (NVDA - Analyst Report) success with its Tegra processor continues as Tegra K1 processors are being used by Acer for their Chromebook 13. Reportedly, Tegra K1 processors are more energy efficient and offer a longer battery life to Acer Chromebook 13 compared with the currently available Chromebooks.

NVIDIA’s foray into the Chromebook market is encouraging as the research firm Gartner estimated in a recent report that approximately 5.1 million Chromebooks will be sold in 2014. Also, Gartner expects sales to jump to 7.5 million in 2015.

Moreover, NVIDIA’s joining forces with Acer is a prudent step as Acer has emerged as the leading Chromebook vendor in the second quarter of 2014 capturing 30% market share in the April-June period, per WitsView, a Taiwanese market research firm. It is also worth noting that Acer replaced Samsung at the top spot. Per data from NPD, another research firm, Acer had topped the Chromebook market in the first quarter as well.

In addition, Google (GOOGL - Analyst Report) selected NVIDIA’s Tegra K1 processor to power its Project Tango tablet development kit, which will help developers to build applications featuring 3D mapping and sensing capabilities. Moreover, Xiaomi, a Chinese mobile manufacturer launched its tablet powered by TegraK1 processors.

NVIDIA reported a phenomenal 200% surge in revenues from Tegra processors in the last quarter (second-quarter 2015) aided by a boost in the sale of auto infotainment systems and mobile devices.

We believe that NVIDIA’s innovative product pipeline that consists of the recently introduced SHIELD 2 and mobile processor Tegra K1 will boost top-line growth. Moreover, the company’s recent strategic alliances bode well over the long term.

At the same time, the continued decline in PC sales is a cause of concern for NVIDIA’s GPU segment. Competition from the likes of Intel (INTC - Analyst Report) and QUALCOMM Inc. (QCOM - Analyst Report) also remains a near-term headwind. 

Currently, NVIDIA has a Zacks Rank #2 (Buy).

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