Is It Time to Dump NVIDIA?

NVIDIA (NVDA) has been one of my favourite tech stocks this year. The chipmaker has appreciated considerably in the second half of 2016 and although the company is currently trading at an expensive valuation, I think investors can still make a profit by buying the stock. NVIDIA is slowly strengthening its grip over the gaming market and is also making headway in the automobile industry. Given the positives, I think NVIDIA still has about 10% upside potential.

NVIDIA has been gaining at the cost of its primary rival AMD (AMD). In March 2015, NVIDIA introduced its graphic processor known as GM200.
The company also released a graphic card grounded on all capabilities of GM200, called Titan X. When the Titan X was available for sale in the market, it became the undisputed single-GPU performance winner. Titan X’s leadership in the market lasts for around three months, later on it was considered in line with the NVIDIA’s lower-end GTX 980 Ti, grounded on cut-down type of the GM200 chip.

Recently, a report from Digi Times showed that NVIDIA’s high performance graphics portfolio, including GTX 970, based on GM204 chip and GM200 chip, are in short supply due to strong demand. The demand mainly originates from China. This disproportion in the supply and demand chain has speciously led to a 15% surge in average selling prices for high performance chips.

The company as well as vendors will carry on to extract profit from the surged prices of cards implementing high performance processors such as Colourful, ASUSTek, and Galaxy. Almost every graphic card player has botched to register unit growth in 2015, their top lines are projected to increase at least 20%, due to the price treks.

In third party reviews, the performance of Titan X was still hastier than the GTX 980 Ti by a small difference, whereas the cost of Titan X was considerably decreased to $650 from $999, after the launching of 980 Ti.

One of the worst things for Titan X is that the company did not permit third party vendors to build modified cards around the full GM200 chip. Customization can provide even better performance which permits the graphic processor to run at higher speeds than the factory rating.

Although it’s not a big matter of issue while seeing the company’s robust position in the market. It is worth highlighting that the company’s gaming graphics business has carry on to perform stunningly in terms of market segment share as well as revenue, so this is just a minor cavil rather than a noteworthy issue compared to the NVIDIA’s product strategy.

Due to NVIDIA’s progress in the gaming market, I think the stock has more upside potential. So, I think investors would be wise to add NVIDIA to their portfolios.
Published on Dec 31, 2015
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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