Is It Time to Dump NVIDIA?

NVIDIA (NVDA) has successfully grasped a robust position in the graphics cards market, and also deals in various other segments such as driverless cars, data centers, virtual reality, as well as machine learning. The company’s top-line surged 17 percent y-o-y in the fiscal first quarter of 2017 and is a clear sign that the company is not done growing.

The company recently introduced its new graphics card GTX 1080 based on Pascal architecture that focuses on the high-end segment of the gaming market, whereas its foremost rival AMD is about to release its new graphics card Radeon RX 480 grounded on Polaris architecture.
AMD’s Radeon is intended to focus on the mainstream market, offering NVIDIA a significant advantage of taking the lead in the lucrative high-end market that will drive its margins. Moreover, it is highly likely that NVIDIA will soon release a new graphics card that will focus on the mainstream market as well. It would be stupid to assume that NVIDIA will let AMD have the mainstream market to itself.

AMD’s CEO Lisa Su claims that graphics cards based on Polaris architecture will deliver twice the performance compared to prevailing graphics cards. However, NVIDIA’s aggressive launch of GTX 1080 and GTX 1070 shows that the company does not want AMD to gain market share. NVIDIA’s GTX 1080 is available in the market for $600, and it can likely entice mid-range PC gamers who previously would not have considered spending $1,000 on graphics cards.

Apart from these, NVIDIA recently got good news from Amazon. Amazon said that it will use computers powered by eight NVIDIA GPUs. Amazon is escalating its existence in cloud-based artificial intelligence computer services. Amazon strategizes to start a computer renting service for the companies who desire to run cloud-based deep learning or artificial intelligence software.

According to a report, it was mentioned that a single artificial intelligence can use up to 80 PCs. NVIDIA spent almost $2 billion to develop Tesla P100 mainly designed for deep learning platform and artificial intelligence computing, and Amazon will probably come up with a foremost buyer of Tesla P100.

Conclusion

Despite NVIDIA’s strong rally and rich valuation, I think the stock still has a lot to offer in the long-term. If you have read my previous articles, you’d be aware that I have recommended buying NVIDIA over ten times in the last few months and I still think the stock can be a rewarding investment for people who have a 5 year investing time frame.
Published on Jun 8, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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