As if NVIDIA Corporation (NASDAQ:NVDA) hadn’t exploded enough already with a stellar gain of $40 in the last three months, the stock is now poised to push even higher. Here we take a look at four reasons why Nvidia is on the cusp of further growth- and why it is still not too late to join the party:
- Artificial Intelligence – AI is the future of growth (the AI market is estimated to be worth $36.8 billion by 2025)- and one company leading the way is Nvidia. Its Nvidia Deep Learning Institute should train 100,000 develops in 2017. Indeed, we can see the surge in interest in AI reflected by the tripling of Nvidia’s data center revenue in the last quarter to $409 million. Nvidia-Tesla GPU accelerators are used by all the tech giants including Microsoft, Facebook and Alphabet- which isn’t surprising given that the Nvidia Tesla V100 is the most advanced accelerator ever built. It uses HPC (high performance computers) and AI to bring together both powerful scientific simulation and data science for drawing insights from data. And most interestingly, AI is, according to Nvidia, the only solution for self-driving cars, which leads us to…
- Driverless Cars – at the moment this is not one of Nvidia’s most profitable units (it contributes about 7% of revenue) but this could well change as the driverless market sector heats up. Back in May Nvidia announced that it was partnering with Japan’s largest automaker Toyota in respect of its Drive PX 2 AI platform, and the company also has collaborations with Audi and Mercedes. No doubt more partnerships will be added to this list in the near future. Nvidia’s supercomputer, which is installed in the car trunk, uses cameras, radars and AI to monitor, learn and respond to its environment. But it can also send data to an external supercomputer called DGX-1 which has even greater data capabilities.
- Gaming – Despite fears of a gaming slowdown, Nvidia’s gaming unit revenue has actually soared by an incredible 49% year-on-year in bringing in over $1 billion in the last quarter. And investors now think that the sector will continue to experience strong growth. One of the drivers of this growth is eSports-intended AAA games, which use Nvidia’s graphics platform GeForce. These games require graphics of a higher quality which Nvidia can provide. In fact, back in May, Nvidia launched the inexpensive GeForce GT 1030 GPU especially for gaming which starts at just $70.
- Virtual Reality – Last but not least is virtual reality which, like AI, is set to become a hugely valuable market which could be worth as much as $33.9 billion by 2022. For high-end graphics processors with VR capability, Nvidia is way out in front with over 70% of the market for discrete desktop GPUs. Rivals like Advanced Micro Devices (AMD) will find Nvidia a tough competitor to beat here as Nvidia has already unveiled laptop GPUs that can support VR. At the same time, Nvidia also has its impressive Project Holodeck up its sleeve which allows users to import full-resolution models into VR to collaborate and share.
What’s the word from the Street?
Nvidia has a Moderate Buy analyst consensus rating according to TipRanks. This means that the stock has received 13 buy, 9 hold and 2 sell ratings in the last three months. Meanwhile, if we look at recent price targets from top-rated analysts we can see that they have become progressively bullish- with Citigroup’s Afik Malik even offering a 12-month price target of $180 which translates into upside from the already-high current share price of 23%.