NVIDIA’s Next Multi-Billion Dollar Opportunity

I have always liked NVIDIA (NVDA), due to its ability to innovate and dominate growing markets. NVIDIA has managed to perform well in the PC gaming segment despite the deceleration of the entire market. And now, the company is currently trying to grasp a robust position in the Virtual Reality segment. Virtual Reality and Augmented Reality could bring noteworthy upgrades, given the requirements of the technology.

According to several estimates, the VR and AR market will cross the $100 billion mark in the next few years. It is clear that the AR and VR leader will benefit a lot from the growth.
Given NVIDIA’s history of entering and dominating new markets, I think investors should buy the stock.

At present, issues regarding the loss of licensing revenue from Intel are secondary compared to the company’s robust presence in the GPU market and long-term prospect in markets such as data centers, virtual reality, autos, and deep learning.

NVIDIA still has to work hard to maintain its leading position as its foremost rivals such as AMD, MobilEye, and Himax in different sectors have their own growth strategies, which do not include allowing NVIDIA to defeat them in the approaching battles.

Intel has frequently been in discussions with AMD for licensing its graphics technology. At this point, it is not possible to say that it won’t hurt NVIDIA, but at the threat of being desperately trivialising towards AMD. One should keep in mind that AMD’s history speaks for itself, as it never managed to perform better than NVIDIA.

If Intel chooses AMD for its licensing deal, it is possible that it could sign more deals with AMD despite the latter’s underperformance. But, it is highly unlikely that NVIDIA is going to lose its market share due to the competitive consequences of a licensing deal.

Despite the weakening of PC sales, NVIDIA is still getting robust growth from the gaming segment. It is remarkable that the company generated only 20 percent of its revenue from its home country while 40 percent of revenues came from China. NVIDIA has diversified itself in various other segments but has always maintained its focus on the gaming segment.

Currently, Virtual Reality is at its early stage and appears to be ready to rise up very soon. The demand for Virtual Reality is moving higher, and the upward trajectory will continue. Therefore, it is clear that NVIDIA has a robust opportunity in the form of VR and it will likely speed up massively in the coming years.

NVIDIA has broadened its horizon nicely, which is why I think the company has more to offer. The VR and AR markets represent great potential for NVIDIA, and there’s no reason to believe the company won’t benefit from it.
Published on Apr 8, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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