Worldwide chip sales will fall 31 percent to US$141 billion this year, according to a study by the Semiconductor Industry Association. They're expected to rise 6.4 percent next year, the researcher said earlier this month.
Intel stock, which has lost about half its value since August last year, is up 5.6 percent this year. Texas Instruments, the biggest maker of chips for wireless phones, has fallen 34 percent, and Motorola Inc, which makes chips for phones and other communications gear, has fallen 16 percent.
Some investors said Nvidia stock may be in for a fall.
"I think it would be sinful to put other people's money in a stock" after such gains, said Mike Weiner, who manages the US$2 billion One Group Diversified Equity Fund in Columbus, Ohio.
Nvidia and ATI are turning their attention to challenging Intel in chipsets, which are becoming more commonplace. And now that Nvidia has surpassed ATI in graphics chips for desktop computers, it's going after ATI in the notebook-PC market, where ATI has a 58 percent share, according to Mercury. Nvidia's share is 8.3 percent.
Looking ahead, the biggest gains for graphics-chips makers are likely to come from their entry into the US$20 billion video-game market. Nvidia chips improve graphics for Microsoft Corp's Xbox and ATI's for Nintendo Co's GameCube, which are among the 20 "hottest toys" this holiday season, according to a list published by Toys "R" Us Inc.
"What used to be a niche space has now broadened out to where a lot of homes in North America and around the world are playing video games either on a computer or on one of these consoles," said David Hodgson, an analyst at Dundee Securities in Toronto.
Many analysts forecast that Microsoft and Nintendo will outsell Sony Corp's PlayStation2 machine, more than 20 million of which have been sold since its release in October last year.
ATI expects to receive about US$5 to US$8 for each GameCube sold, according to Scotia Capital analyst Gus Papageorgiou. GameCube will contribute as much as US$32 million to ATI sales, based on the 4 million consoles that Nintendo expects to sell by the end of March.
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