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Advanced Micro Devices ( AMD ) might score an Intel ( INTC ) license deal. It would scoop  Tesla Motors ( TSLA ) partner Nvidia ( NVDA ), which receives $66 million in quarterly royalties from the No. 1 chipmaker, a Needham analyst says. But Argus analyst Jim Kelleher says that Nvidia has distanced itself from the PC market, instead focusing on niche growth areas like virtual reality (VR), autonomous vehicles, artificial intelligence, the Internet of Things and robotics. In VR, Facebook ( FB )-owned Oculus recommends Nvidia and Advanced Micro Devices graphics cards for its Rift series. This week, Oculus announced 30 new titles and demoed the tech at the Game Developers Conference in San Francisco, Calif. Graphics cards are outfitted with GPUs, or graphics processing units. Advanced ones are needed for many of today’s richly visual computing experiences that are computationally intensive — everything from the movement in gameplay to VR and many other kinds of applications. Nvidia’s Intel Royalty To Expire On Friday, Kelleher initiated coverage on Nvidia stock with a buy rating and a 39 price target, a day after Needham analyst Rajvindra Gill reiterated a hold rating on Nvidia stock following the Intel-Advanced Micro Devices rumor. Nvidia is on the IBD 50 list of leading growth stocks. In early trading on the stock market today , Nvidia stock surged 3.9%, trading near 34.10 and in buy range from a 33.16 cup-with-handle buy point. Advanced Micro Devices stock flew higher, up 4.3%, but usually trades considerably lower, near 3. Nvidia’s royalty deal with Intel is set to expire in 2017, and the GPU leader failed in December to defend its patents in a lawsuit against Samsung and Apple ( AAPL ) supplier Qualcomm ( QCOM ). “We don’t litigate for our business model,” CEO Jen-Hsun Huang told investors in November. “We don’t depend on licensing for our business model.” To offset the loss of Intel’s royalty stream — which will impact 2017 earnings per share by 25-30 cents — Nvidia needs to add $470 million in annual revenue, Gill wrote in a research report. He noted that Intel can continue using Nvidia patents filed before March 31, 2017. “While Nvidia has expressed interest in monetizing its GPU patent assets, we have seen little evidence to date that this will materialize,” he wrote. Nvidia controls 75%-80% of the GPU market, having long ago ceded the gaming console market to Advanced Micro Devices, which provides its RADEON semi-customized chips to Sony ( SNE ) and Microsoft ( MSFT ). Nvidia Shifts To Gaming In 2013, PC sales accounted for 42% of total Nvidia revenue. In 2016, gaming, enterprise graphics, data center and automotive brought in 85% of total revenue, dropping PC sales down to 9%. IP brought in 6%. Gaming represents a $20 billion market opportunity for Nvidia, leading $8 billion, $6.5 billion and $5 billion opportunities in the artificial intelligence, enterprise graphics and data center markets, respectively, Kelleher wrote. In fiscal 2016, gaming (largely PC) generated $2.8 billion of Nvidia’s total $5.01 billion in sales, up 30% year over year. Nvidia targets 5%-10% annual growth “based on gamers’ insatiable desire for improved graphics in games,” he wrote. Nvidia also pulled in $750 million in enterprise graphics, $340 million in data center and $320 million in automotive. In fiscal 2016, Nvidia’s automotive segment grew 80% year over year and includes Nvidia-Tesla-partnered GPUs. The U.S. Department of Energy selected Nvidia’s NVLink interconnected technology coupled with IBM ( IBM ) processors to power its next-generation supercomputers, 10 times faster than current supercomputers. Kelleher recognized that 2018 earnings might flatten as Nvidia makes further investments in “growth niches.” “We regard this as an acceptable trade-off for building share in markets that could drive significant growth in years to come,” he wrote.