Intel Corp (INTC)

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= UPDATE: ATI Tech Falls On Downgrade, Weak GameCube Sales

By Stuart Weinberg Of DOW JONES NEWSWIRES TORONTO (DOW JONES)--Shares of ATI Technologies Inc. (ATYT) are down 7.5% after Wedbush Morgan cut its rating on the stock to hold from buy, citing ATI's rich valuation and the threat of increased competition from Intel Corp. and Nvidia Corp. (NVDA).

Weak GameCube sales by Nintendo Ltd. (J.NTD) for the three-month period ended June may also be weighing on the stock, as may news of Nvidia's $70 million acquisition of MediaQ Inc., a closely held maker of mobile device displays.

On Nasdaq Tuesday, ATI is down 97 cents to $11.91 on about 4.95 million shares. Nvidia is up 3% to $21.06.

"In our opinion, (ATI) is facing increasing threats from Intel in notebook integrated chipsets and Nvidia in integrated chipsets for both desktops and notebook," Wedbush Morgan analyst David Wu said in a research note.

According to Mercury Research, Intel's share of the desktop integrated market climbed to 64% from 57% in the second quarter, Wu said. In the notebook market, Intel's market share jumped to 39% from 25% during the same period, he said, adding that he expects Intel's market share in this segment to increase.

Given Intel's gains, Wu said he believes Nvidia is likely to enter a license agreement with Intel to sell integrated chipsets that run on Intel microprocessors. Currently, Nvidia's integrated chipsets run on Advanced Micro Devices Inc. (AMD) microprocessors, which have a 20% market share, a distant second to Intel. ATI's integrated chipsets are licensed to work with Intel and Advanced Micro.

Wu doesn't own ATI or Nvidia shares and Wedbush Morgan doesn't have an investment-banking relationship with either company.