For traders that want to invest in the semiconductor industry, there is certainly no shortage of options. However, this year there was one standout player in the sector: Nvidia Corporation (NASDAQ:NVDA). Over the last 12 months, Nvidia stock has jumped a whopping 231% and its earnings results turned heads.
Typically, a stock that has seen such an impressive run-up over the course of just a few months is one to avoid as there is an inevitable slowdown on the horizon. For Nvidia stock however, this may not ring true.
While its unlikely that shareholders will see another year of 200%-plus gains, NVDA stock’s rally may not be over. The company has seen its share price rise for good reason, and its promising future in the semiconductor industry means that it could still be a good investment for those who missed the boat during the past year.
Three Reasons NVDA Stock Is Still a Good Buy
One of the big reasons to buy and hold Nvidia stock is the company’s presence in the automobile industry. Cars are becoming more technologically advanced and most agree that we will see a massive shift toward self-driving vehicles over the next decade. NVDA stock is likely to ride that wave alongside the automakers that are investing in autonomous driving because the company has made itself a leader in producing hardware for self-driving vehicles.
Nvidia’s Drive PX2 system is already being used by over 80 automakers to power their autonomous vehicle efforts. NVDA also partnered with China’s Baidu Inc (ADR) (NASDAQ:BIDU) to create a comprehensive self-driving platform. This is a huge step forward for Nvidia stock, not only because it brings together two powerhouses in the industry, but because it will make NVDA’s offerings compatible with both U.S. and Chinese systems which could create a strategic advantage.
Autonomous vehicles developed in China will have to deal with much more difficult traffic situations, so adjusting the cars for use in the U.S. will be much easier than trying to do it the other way. Not only that, but many analysts believe that China will turn out to have an even larger market for autonomous cars than the U.S., making it a key focus for companies within the industry. By working together with Baidu, Nvidia is ensuring that its platform is capable of supporting automakers hoping to roll out self-driving cars in either country.
Another industry that is expected to explode in the coming years is cloud computing. More companies are transferring their data to the cloud and that means that cloud computing technology is becoming increasingly more important as the workload increases.
Enter Nvidia with its data center GPUs.
NVDA worked together with International Business Machines Corp. (NYSE:IBM) over the past year by providing IBM clients with high-powered GPUs. The firm has also provided GPUs for big names like Facebook Inc (NASDAQ:FB) in an effort to prove itself within the space. The partnerships showcase just how powerful Nvidia’s products can be and solidified the company’s foothold in the cloud computing space by drumming up more demand for its GPUs.
Perhaps the most enticing reason to own NVDA stock is the company’s superiority in the gaming industry. The company makes powerful chips that support high-quality games and virtual reality experiences and this sector has helped Nvidia stock cope with an overall decline in the use of PCs.
As virtual reality gains momentum and online gaming becomes even more of a social affair, it can be expected that the number of gamers will increase. While there has been some dispute as to whether virtual reality will ever expand beyond a niche market, the technology and social aspect is likely to draw more people in. Not to mention VR uses outside gaming, like training exercises and communication.
Bottom Line on Nvidia Stock
Nvidia stock can’t continue to grow at the same rate forever, but the stock is still a good investment opportunity even though its price has increased significantly. Investors might want to wait for another market pullback to add NVDA stock to their portfolios, but the firm is likely to continue delivering solid gains in the coming year.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.