Advanced Micro Devices (NYSE: AMD) is taking aim at its cross-town graphics chip rival, Nvidia Corp. (Nasdaq: NVDA), preparing a new product for competition inside computers built for Microsoft's Windows Vista. Despite its efforts, however, one analyst contends that the new chip may not be enough.

AMD - which bought Nvidia's largest rival last year, ATI Technologies - is scheduled to launch its new high-end graphics chip in March.

The product, code-named the R600, will support Microsoft's Direct-X 10 graphics language, which is used for advanced features of Windows Vista, and some games. It has faced a number of setbacks since the project started, however, leaving research analyst Shawn Webster seeing further delays.

We do not see how execution could have improved as a result of AMD's acquisition of ATI, the J.P. Morgan analyst told clients on Tuesday. As a result, we believe there is still risk the product may be launched in insufficient volumes, or delayed again.

Santa Clara, Calif.-based Nvidia has been shipping Vista capable hardware for months, Webster notes. The company is also expected to launch an entire portfolio of high-end products around the beginning of the second quarter - months ahead of AMD.

As a result, we believe Nvidia should be able to preserve its market share in the desktop segment in the coming year, Webster contends.

The analyst notes that the performance of AMD's new graphics processor may be higher than some experts are contending, however. Roughly 10 percent of Nvidia's units are exposed to the high-end, comprising 30 percent of the company's revenues.

If the new product does have superior performance and AMD is also able to launch the product at sufficient volumes, it could add risk of high end share loss for Nvidia, he said. J.P. Morgan upgraded the firm to Overweight from Neutral.

In the fourth quarter, Nvidia was able to retain its lead in the graphics hardware market, garnering 5 percent more market share than AMD, taking 29 percent of graphics revenues.

The graphics chips are used inside of computers and consumer electronics to render images on to the screen, and also process 3-dimensional objects.

Shares of Nvidia were up 3.55 percent today, or $1.15 to $33.52 on the Nasdaq Stock Market. AMD fell 1.79 percent or 28 cents to 15.32 to close on the New York Stock Exchange.

California