NVIDIA’s Multi-Billion Dollar Opportunity

I have always liked NVIDIA (NVDA) more than Advanced Micro Devices (AMD) and although the latter has performed better this year, I think NVIDIA is still the better of the two. NVIDIA has been a great performer this year as the stock is up almost 100% from its February lows. However, the company is venturing into several other high growth markets that can help it sustain its upside trajectory.

Why Virtual Reality matters?

NVIDIA governs the graphics card market as the company has formerly introduced amazing graphics cards that work accurately and efficiently.
Most recently, the company introduced new architecture titled as Pascal architecture, and graphics cards based on this architecture. NVIDIA’s GTX 1080 and GTX 1070 were the first two graphics cards based on Pascal architecture. Both the graphics cards are working efficiently and have displayed strong sales.

NVIDIA’s GTX 1070 graphics card performed better than GTX 1080 and due to this, was out of stock on the company’s official site for some days. However, the company accelerated its production rate to fulfill the surging need for GTX 1070.

At present stage, eSports and virtual reality accounts for the two most significant sectors that offer a lot of opportunities for NVIDIA, as both the sectors are at their infant stage and will definitely grow further with time. To take advantage of the opportunities offered by these two sectors, NVIDIA has transitioned to a platform company, with solutions for gaming, virtual reality. Furthermore, the company has also prolonged its reach in the automotive sector also by delivering Drive PX 2 system.

On the other hand, it is clear to everyone that HTC Vive and Oculus Rift are the two leading headsets designed for virtual reality. To play virtual reality games at acceptable performance levels, HTC Vive and Oculus Rift require superior performance graphics cards. Therefore, NVIDIA will definitely reap profits from the virtual reality trend.

It appears that NVIDIA is seriously working to gain the lead in the virtual reality market, as its Pascal architecture implements specialized circuitry that aids to speed up virtual reality workloads. Moreover, the company publicized VR Works, a comprehensive suite of APIs, engines and libraries that permits application and headset developers to produce stunning virtual reality experiences.

The rising trend of VR could lead to both unit growth in NVIDIA’s core graphics processor and average selling price growth.

Conclusion

NVIDIA has its foot in many high growth markets. Although the stock has run up too high and is overvalued, I am confident that the company will deliver stellar earnings, thereby pushing the stock higher. Hence, I think NVIDIA is a buy.
Published on Jul 19, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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