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Susquehanna Financial upgraded graphics chip maker Nvidia (Nasdaq: NVDA) to neutral from negative and raised the price target on the stock to $23 from $9.

Our call on NVDA's stock was clearly wrong, as we underestimated the multiple premium investors would confer onto the stock due to the long-term potential of Tegra, analyst Chris Caso wrote in a note to clients.

Nvidia's Tegra is a system-on-a-chip series developed by Nvidia for mobile devices such as smartphones and other mobile Internet devices such as tablets. Tegra 2 is the latest chip in the Tegra family.

While the Tegra 2 design wins highlighted at consumer electronics show (CES) came as no surprise, the analyst do believe that the new generation of ARM processors present a substantial competitive threat to Intel (Nasdaq: INTC), and Nvidia has managed the early lead.

Analyst Caso expects Tegra 2 to generate about $400 million revenue in 2011.

We expect this market to grow further in 2012, although Nvidia is likely to lose share as competitors follow, Caso said.

However, Caso warned that the negative impacts from a decline in Nvidia's PC graphics business are larger in magnitude than the near-to-medium benefits from Tegra.

The problem is that not a single Tegra 2 powered device has been sold yet - so at this point it is both impossible to size the long-term market and impossible to disprove a bullish thesis, the analyst said.

Meanwhile, Caso said revenue from Apple will decline once Apple moves its notebooks to Intel's Sandy Bridge processors, which the analyst believes is likely to occur in the second half of 2011 during their annual refresh. Currently, Apple is using Nvidia's chipset on its Macbook Air.

In addition, Caso expects Sandy Bridge to nearly entirely eliminate the low-end graphics segment, once it ramps up, and the analyst's checks suggest that Sandy Bridge makes entry-level discrete graphics unnecessary.

Nvidia is expected to report its fourth-quarter results on Feb. 18. Wall Street expects the company to earn 21 cents a share on revenue of $893.79 million, according to analysts polled by Thomson Reuters.

Shares of Nvidia closed Thursday's regular trading session at $24.47. The stock has been trading in the range of $8.65 to $25.05 for the past 52-weeks.