Nvidia Corporation (NASDAQ:NVDA) is aggressively climbing higher on Wednesday, continuing to push the ceiling higher as it trades at new peaks. The run in NVDA stock is being prompted by an excellent first-quarter report that somehow stunned a Wall Street crowd that knows exactly how well-oiled this graphics hardware maker is.
Yes, Nvidia shares trade at a current price-to-earnings ratio around 50. For a stock with a market cap north of $70 billion, that is a high bar for continued growth.
And yes, as NVDA stock continues its huge climb — up 233% in the past 12 months — there have been as many detractors as fans. Other big chip companies like Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices Inc (NASDAQ:AMD) sport lower P/Es at the moment. They’re considered commodity plays in a low-margin business, and their key to success is finding the next market to sell a lot of chips into.
But Nvidia has taken a different approach.
The Nvidia Way
NVDA sells high-end graphics chipsets and processing units. And it doesn’t bother competing on the low end with the big chip makers. It has carved out a niche and then expanded as that niche has become one of the most dynamic industry sectors in all tech — visual computing.
Basically, that means instead of looking at a bunch of numbers, you can see a visual image of what the numbers mean. That is the evolution computing is going through in major sectors like big data, cloud storage and biotechnology.
NVDA also timed the automation for next-generation cars perfectly. Most of the major car companies are starting to incorporate much more of a graphical interface in their cabins. Some car cockpits are starting to look more like the cockpits of fighter aircraft than cars.
But this is all part of the massive movement into the Internet of Things (IoT) that is sweeping through every industry that puts computer chips in its products. Market research firm Research Nester estimates that by 2023 the global IoT market will be close to a $700 billion industry.
Nvidia is in the center of that market. And all this doesn’t even include virtual reality and augmented reality systems that are coming to market.
Bottom Line for NVDA Stock
This is what has mystified Nvidia’s skeptics. This humble graphics card provider is now a dominant player in the semiconductor sector, leaving major players like INTC and AMD to play catch-up.
They continue to wait for the company to have its reckoning. But every quarter brings better numbers, and those short sellers get caught once again in a squeeze that takes NVDA stock to an even higher plateau.
But this isn’t about quarterly short squeezes. Nvidia continues to deliver. Revenue for Q1 was up 49% from the same quarter last year. What’s more, it guided higher for Q1.
Another bullish sign is the revenue growth came in every sector Nvidia is involved in. It’s not leaning on one or two markets to get this growth.
Even after this run, there are even better days ahead.
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.