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Is Nvidia the Superhero of 2018?

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Forget about Superman and Batman. Unless you’ve been totally ignoring the stock market for the past year or two, you have undoubtedly heard of Nvidia, the Santa Clara, California-based tech company that has become an industry leader in graphics processing unit (GPU) design.

One reason the company has enjoyed such positive press in recent months is that its products are heavily used in professional markets, gaming, and all things related to cryptocurrency.

Quick Facts about Nvidia Corporation

After a long gestation period since its founding in 1993, Nvidia has finally decided to focus on five key areas of the tech industry: Artificial intelligence (AI), the automotive market, gaming, data centers, and professional visualization. That decision, taken in 2014, has led to something of a “perfect storm” of good luck for Nvidia. Every one of its five focal points has been a winner, which means that Nvidia is currently enjoying a phase of investor attention like never before.

The basic stats look like this: Nvidia is traded on the NASDAQ under “NVDA,” with formal listings in the sub-categories of consumer electronics, video games, and semiconductors. Founded in 1993, the company serves a worldwide clientele from its Santa Clara headquarters. Its video game consoles, chipsets, graphics procession units (GPUs), and central procession units (CPUs) make up the bulk of its product line.

Revenue in 2016 was $6.9 billion, with a net income that same year of $1.67 billion. The company currently employs more than 10,000 people and its website is located at Nvidia.com

The Case for Nvidia Stock as a Long-Term Hold

Artificial intelligence and the entire field of “visual computing,” which is Nvidia’s specialty, are ripe for long-term investors. At least that’s the consensus of most tech market experts. The reasons for long-term “buy and hold” on the stock are many. Here are the key reasons that seem to appear over and over in media outlets:

Nvidia is in the right space at the right time: Its core business specialties are centered on two particularly popular and integral niches: gaming and high-level computer technology. That means the company has its hand in the coming era of artificial intelligence, drones, smart/virtual gaming, virtual reality products, and self-driving automobiles.

Company leadership is stellar: The driving force behind Nvidia is one of the company’s founders, Jensen Huang, who owns a large chunk of its stock. Not only does Jensen Huang know Nvidia inside and out, he has a vested interest in its future well being. His leadership style and integrity are routinely, and universally, praised by his competitors and market experts.

Nvidia is a market leader: In one of its core product lines, discrete GPUs, the company holds clear market dominance over second-place AMD (a company where Mr. Huang was formerly worked as an electrical engineer after graduating from Stanford). Nvidia’s market share is 72 percent in this space, while AMD’s is 28 percent.

Dividends and buyback programs are a rarity for tech companies: Nvidia has a robust dividend and stock buyback arrangement, which many analysts point to as evidence that management is extremely confident in the future.

Charts Tell the Story (courtesy of Stockcharts.com)

Even with the recent stock market correction, Nvidia is still sitting pretty, atop a large price increase from its recent lows of $155 per share. Current prices, as of this writing, stand at $217 per share but had soared as high as $247 before the early February downturn.

Note that just three years ago the company’s shares regularly hovered around the $20 mark on good days. With the rise of artificial intelligence, virtual gaming and virtual everything else, the corporation is enjoying a golden era that could last for years, if not decades.

Will Nvidia be the Apple or McDonald’s of this era? Some analysts think so, while others are more cautious, noting that competitors like AMD, Qualcomm, and Intel are fierce corporate fighters and could make a move to acquire, defeat or otherwise neutralize the company in a potential major market shakeout. Time will tell.

How Will Nvidia Perform Between Now and 2019?

There are no “sure things” in investing, especially in a year where records seem to be set and broken each week. But most of the major market analysts are expecting Nvidia to have a very healthy 2018. Here’s why:

Reason one: Nvidia soared through 2017 like a champ, posting an 85 percent increase in its stock price and completing its total transformation from being solely a GPU maker to also being a major player in the AI space. A series of new products were launched by Nvidia in 2017, with the goal that significant profits would follow in 2018. Most market analysts believe all those products will do very well.

Reason two: With at least one completely new graphics card for video gaming in the works, Nvidia’s outlook for 2018 should continue to be bright as the entire e-sports sector is growing rapidly. 

Reason three: Company initiatives related to so-called “smart cities,” as well as drones, are gaining ground already and should help deliver solid financials for the calendar year.

Reason four: So far, major competitor Intel has not been able to crack the Nvidia hold on the “deep learning” niche, all of which is GPU-oriented and one of Nvidia’s key specialties. Even though Intel has much more capital to work with than smaller (by comparison) Nvidia, the latter has a huge lead in the deep learning field.

Reason five: Wall Street analysts have consistently underestimated Nvidia’s ability to deliver solid financial data quarter after quarter. And even though most analysts are on record as saying the company will have a positive 2018, investors should never doubt the corporation’s potential to out-perform even the most positive predictions. Nvidia might have trouble keeping up the fevered pace it set in 2017, but that doesn’t mean growth will stop. Nvidia is almost perfectly positioned for coming waves of interest in both AI and cryptocurrency.

All of the above is for informational and educational purposes, so don’t take it as investment advice. Always speak with a professional investment advisor before committing your funds.

 

 

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