1 No-Brainer Reason Why NVIDIA Is a BuyNVDA) is a growth stock and I have been bullish on the company for a long time now. I prefer NVIDIA over rivals like AMD (AMD) primarily because the company has a diversified revenue stream and growing presence in many important markets. One such market is the automotive market.
Nowadays, the PC sales are moving downward day by day, therefore, graphics cards giant NVIDIA is shifting its focus from PCs to automotive sector to maintain its leading position and revenue.
However, NVIDIA’s Tegra operating margins dropped considerably during this period as mobile computing is an R&D rigorous business. The company curled down its lcera baseband business previous year and has shifted its attention on automotive and gaming, to maintain its growth in the Tegra division.
NVIDIA generates major portion of its Tegra revenue from the automotive segment, and it is highly likely that intensifying footmark in the automotive segment will aid the company to surge its Tegra revenue base and profitability in the long-term.
According to the Q4FY16 results, the company’s Tegra chips were installed in more than 10 million vehicles, a surge of around 7.5 million as compared to the figure previous year. The company comprises a striking list of huge companies such as Audi, Bentley, Mercedes-Benz, Honda, and Porsche. Even Tesla Motors uses NVIDIA’s chips to power the infotainment system for its Model S and its recently launched Model X SUV.
Apart from this, NVIDIA currently includes 70 automakers, and research group that are presently utilizing the company’s autonomous and semi-autonomous car platform, Drive PX. However, the company anticipates this figure to grow even more.
The company’s latest autonomous car platform, Drive PX 2, by now has its first client in Volvo. The car manufacturer will use NVIDIA’s tech into 100 autonomous SUVs next year, as an initiative of the automaker’s DriveMe autonomous cars.
The automotive market represents a huge opportunity for tech stocks and given NVIDIA's growing presence, I have no doubt that the company will dominate the sector as well. Due to the vast potential, I think investors can still buy NVIDIA despite its rich valuations.
Published on Mar 31, 2016By Akshansh Gandhi