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Nothing Can Stop Nvidia Corporation (NVDA) Stock

It’s time for the smartphone revolution to move over; the age of artificial intelligence is officially here. Need evidence? Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) recently announced that they had added neural network learning capabilities to their respective translation apps. Google also has said that one of its music services, Play Music, uses machine learning to learn your musical tastes and the kind of music you prefer at any given time of day. All of this is good news for Nvidia Corporation (NASDAQ:NVDA) and NVDA stock — here’s why.

Nothing Can Stop Nvidia Corporation (NVDA) Stock

Source: via Nvidia

Although some might see the AI buzzword as mere marketing fluff used by companies to make their products’ features sound impressive, machine learning and deep neural networks are hugely important nevertheless.

Rich Pickings for Nvidia Stock

These are just a few examples., a productivity app, says its AI-powered bot is capable of doing certain tasks for you. Nearly all major public cloud vendors have integrated machine-learning capabilities into their clouds. And guess who is enjoying much of these AI pickings?

It’s none other than GPU leader NVDA, whose high-performance GPUs are finding their way into diverse industries including healthcare, deep genomics, finance, robotics, cybersecurity and online fraud protection.

During the last quarter, the company saw its top line grow a robust 54% year-over-year to $2 billion, $310 million above Wall Street estimates, and much higher than the growth average the company is accustomed to. As much as 12% of the company’s revenue during the quarter was directly tied to AI and deep learning products.

Nvidia CEO Jen-Hsun Huang broke it out this way:

“We had a breakout quarter — record revenue, record margins and record earnings were driven by strength across all product lines. Our new Pascal GPUs are fully ramped and enjoying great success in gaming, VR, self-driving cars and datacenter AI computing. We have invested years of work and billions of dollars to advance deep learning. Our GPU deep learning platform runs every AI framework, and is available in cloud services from Amazon, IBM, Microsoft and Alibaba, and in servers from every OEM. GPU deep learning has sparked a wave of innovations that will usher in the next era of computing.”

NVDA stock is up a blistering 185% year-to-date, with a sizable chunk of those gains having come after Q3 earnings. Nvidia stock has more than tripled over the last 12 months — it appears the company could be on the cusp of something big.

Payback Time for NVDA

It looks like years of heavy investment in AI are finally paying off for NVDA stock. The company has quickly established itself as the de facto leader of the burgeoning industry. Nvidia’s AI customers have jumped from a couple dozen three years ago to more than 4,000 currently.

Specifically, NVDA is using GPU computing to accelerate deep learning algorithms which are data driven. Deep learning systems can do many tasks better than the average human-engineered algorithms, including image recognition and detecting breast cancer. Companies are now able to put mountains of big data to use by using deep neural networks.

Nvidia recently built an AI supercomputer-in-a-box called DGX-1, which uses eight Pascal GPUs. The new supercomputer has 65x deep learning capability compared to systems from just four years ago. DGX-1 will be featured in Tesla Motors Inc‘s (NASDAQ:TSLA) new Autopilot system that will power its Model 3 vehicle.

Innovations like these are likely to fuel long-term gains for NVDA stock.

The AI market is still embryonic, with Tractica estimating that AI spend in 2016 will be just $644 million, but make no mistake, the market is set to see a 57-fold increase over the next decade to $36.8 billion in 2025.

Naturally, rival chip players have been forced to sit up and take notice. Intel Corporation (NASDAQ:INTC) recently upped its AI stake after buying startup Nervana Systems. The chip giant says it’s working on new AI chips that will be 100x more powerful than GPUs. Meanwhile Advanced Micro Devices, Inc. (NASDAQ:AMD) has inked a deal with Alphabet that will see its GPUs, alongside those by NVDA, integrated in Google Cloud to power deep learning functions.

Bottom Line on NVDA Stock

However, Nvidia’s sizable AI infrastructure investments, including its cuDNN deep learning library, should help it maintain a sizable lead for several years at the very least. NVDA stock has made impressive gains over a short period of time, which might limit its near-term gains. But judging by the building momentum in AI, Nvidia stock is likely to see healthy long-term gains.

As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.

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