We’re officially through the first quarter, and shares of NVIDIA Corporation (NASDAQ:NVDA) — my top stock for 2017 — finished the quarter with a modest 2% gain. That performance seems like nothing to write home about, especially when compared with the S&P 500’s nearly 6% gain. However, when it comes to the computer graphics company, I predict that a little patience will pay off big time. In fact, now is an excellent time to pick up NVDA stock before it explodes higher.
I’ll explain exactly why in a moment, but first, let’s review what weighed on the stock earlier in the quarter. Back in early February, Nvidia released perfectly respectable fourth-quarter results, including 55% sales growth, 193% EPS growth and a healthy 19.3% earnings surprise.
Nonetheless, some shareholders took the earnings report as an excuse to lock in their gains — a shortsighted move, in my opinion.
NVDA shares meandered lower through early March. Then, a series of exciting announcements and analyst upgrades renewed interest in the stock …
Catalysts for NVDA Stock
In mid-March, Nvidia revealed that it designed the custom applications processor for the Nintendo’s (OTCMKTS:NTDOY) Switch videogame console. Since its March 3 debut, the Nintendo Switch has been selling so well that Nintendo has decided to double its planned production for the current fiscal year. This is expected to boost Nvidia’s own sales and earnings.
That same week, NVDA also announced that it’s teaming up with PACCAR, a leading global truck manufacturer, to develop self-driving trucks. The two companies have already built a proof-of-concept self-driving truck that is powered by Nvidia’s Drive PX 2 technology. There are currently 300 million trucks on the road around the world, representing a massive untapped market.
NVDA stock is clearly doubling down on self-driving cars; it already has partnerships with many leading automakers, including Audi, Tesla Inc (NASDAQ:TSLA), Mercedes-Benz, Volvo, Honda Motor Co Ltd (ADR) (NYSE:HMC) and BMW. As self-driving cars become more widely adopted, Nvidia’s artificial intelligence car computing platform will be in hot demand.
Then in late March, TenCent (OTCMKTS:TCEHY), one of China’s largest internet service providers, announced that it will be using Nvidia’s Tesla GPU accelerators with its cloud computing platform. In laymen’s terms, TenCent will be relying on NVDA’s industry-leading hardware to supercharge its cloud services.
As a pioneer of artificial computing technology, Nvidia’s products are already used by plenty of cloud service providers, enterprises and research organizations. However, having TenCent’s buy-in is a big deal. With nearly $22 billion in annual revenue, the company operates the world’s largest gaming platform.
These developments build upon Nvidia’s already strong sales and earnings prospects. This quarter, NVDA stock is expected to post 103% earnings growth and 46.3% sales growth.
Then again, most analysts have been aggressively revising their estimates higher, so it seems like the sky is the limit. And I’m not the only one who thinks so. At the time of writing this, NVDA stock rebounded nearly 12% from its recent lows before taking a hit on Tuesday after a Pacific Crest downgrade.
From self-driving cars to virtual reality to artificial intelligence, Nvidia is at the forefront of several fast-growing technologies. In my opinion, the stock’s first-quarter performance isn’t indicative of its true potential. I still consider NVDA one of my top technology plays for 2017.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.