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Following word last week that chip maker Nvidia (NVDA) will sell parts that power Nintendo's (NTDOY) new “Switch” video game system, Jefferies & Co.’s Mark Lipacis today pounded the table for shares of Nvidia, reiterating his Buy rating, and his $80 price target, after concluding the new machine is worth as much as $320 million a year for Nvidia.

To put that in perspective, Nvidia is projected to make total revenue of $6 billion this fiscal year ending in January.

Nvidia shares today closed up $3.17, or almost 5%, at $70.71.

“We estimate this to be a $200-$320m annual opportunity for NVDA near term,” writes Lipacis of the Switch.

"While the incremental dollars would likely be margin dilutive, we view upside potential to our sales and EPS estimates of $0.11-0.16 in 2017."

Lipacis gives the rundown of Nvidia’s work on Switch:

It appears that the Switch will be powered by an NVDA Tegra processor. NVDA created new gaming APIs to take full advantage of the custom software on the device. NVDA stated that gameplay is further enhanced by hardware-accelerated video playback and custom software for audio effects and rendering. We suspect the processing performance will be lower than the Sony PlayStation or the Microsoft Xbox. NVDA's expertise in providing high-performance graphics should help boost gameplay as well as demand for the hybrid console.

This is an outgrowth of Nvidia’s “Shield” game console, which had mixed success: "NVDA's history in a mobile gaming form factor dates back to its SHIELD product, originally launched in 2013. While the SHIELD did not receive commercial success, we think the play to re-engage with the game console makers could lead to longer term benefits for NVDA."

Despite some skepticism, Lipacis thinks Switch can be a gaming contender:

While Nintendo has been largely uncompetitive against the Sony PlayStation and Microsoft Xbox, we think the Switch has the potential to see more shipments. There are very few details on the price point, but we think the Wii and Wii U case studies are instructive. In the first 12 months of launch, Wii shipped 13m units and the Wii U shipped 4m units. Assuming 5-8 million units at a $40 ASP for Tegra translates to $200-320m in revenues and $0.11-0.16 in EPS.

See also remarks in the first post linked above by Lipacis's colleague, Atul Goyal, who follows Nintendo.