It’s a common question that comes up from time to time. After shares have soared and even broke new records as has Nvidia Corporation (NASDAQ:NVDA), when do you sell? No investment rises consistently and indefinitely. At some point, even NVDA shareholders have to lock in their profits; otherwise, it’s just a “paper gain.”
Aside from Nvidia stock, I can’t think of too many investments where the aforementioned question applies this year.
Year-to-date, the NVDA share price is up 72%. At this rate, it’s conceivable that the red-hot semiconductor company will register triple-digit returns. If so, that would make it two consecutive years of triple-digit performances, something that has never happened in corporate history.
We should also consider the fact that semiconductors generally are losing their shine from 2016. For example, the prime rival for NVDA, Advanced Micro Devices, Inc. (NASDAQ:AMD), is up over 16% YTD. By no means is this a bad performance, but AMD lags far behind its over 300% return last year. It’s also fair to note that sector king Intel Corporation (NASDAQ:INTC) is only barely above parity at 4% YTD.
If people want to sell Nvidia stock, I don’t begrudge them. As I said, nothing goes up forever. Furthermore, it’s exceptionally difficult for any company to consecutively register exceptional returns. From 2013 to the end of last year, NVDA averaged 89% returns. This is the best winning streak since 1999 through 2001, when shares averaged 175%. But 2002 witnessed an 83% loss, a reminder never to get too greedy on Wall Street.
Still, I think the overall bullishness in the NVDA share price reflects a critical point in the tech industry. Therefore, I would use any dips in Nvidia stock to load up for the long haul.
Robust Businesses Boost NVDA Stock
Why do I remain so optimistic towards the semiconductor company? Nvidia is one of few investments that has a strong core business, a future business that’s already generating sales, and a long-term strategy that may setup the firm for decades.
Many folks recognize NVDA for its immensely powerful graphics processing unit, or GPUs. These devices allow graphics-heavy applications, such as video games, to operate smoothly and without lagging or interruptions. Among hardcore gamers, Nvidia’s GeForce graphics cards are exactly what’s needed to run today’s games at the highest resolution.
Moreover, as Blue Chip Growth Editor Louis Navellier points out, NVDA is also involved in the console-gaming sector. Their GPU is the core behind the Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) Switch. With Microsoft Corporation (NASDAQ:MSFT) set to launch their latest XBOX One X console later this year, console gaming is an industry that will continue to boost Nvidia stock.
Another rapidly growing use for high-end GPUs is cryptocurrency mining. In a nutshell, mining is the process where individuals compete to validate huge blocks of transactional data. Through this verification procedure, cryptocurrencies such as Bitcoin are able to transfer value party-to-party without the need of financial middlemen.
The first to verify the data receives a cryptocurrency unit for their troubles. But to come out on top (and consistently) requires significant horsepower. Both Nvidia and AMD fine-tuned their GPUs specifically for crypto-mining. As such, the meteoric rise of Bitcoin played a significant role in boosting the NVDA share price.
Even better, I firmly believe that cryptocurrencies will continue their rally after they work through the present correction. Although many folks are critical of Bitcoin, few are willing to bash the underlining blockchain technology. As Bitcoin’s mysticism fades, blockchain integration will increase, and so too will demand for crypto-specific GPUs (and likely Nvidia stock).
NVDA firmly Positioned for Future Growth
Finally, I really dig the tech firm’s leadership role in converting the driverless-vehicles concept into reality. A number of automakers, including Toyota Motor Corp (ADR) (NYSE:TM), Volvo, and Audi, utilize NVDA technology for their driverless-vehicle projects. The trend is only going to move stronger towards driverless tech, which obviously favors Nvidia stock.
Earlier this year, Forbes ran an article estimating that 10 million self-driving cars will hit the road by 2020. Ten years later, one in four cars will feature driverless technology. Not only that, these estimates may be too conservative!
Of course, not everyone is thrilled with the idea of automated driving. Wired came out with a provocative headline, “Self-Driving Cars Will Kill People. Who Decides Who Dies?” The opportunity for NVDA shareholders is that Nvidia has time and industry trends on their side. One way or another, driverless cars will become a prevalent reality, and the company has a massive head start.
As I stated earlier, I understand why those who invested in Nvidia stock early are taking some of their profits. I would do the same. At the same time, I don’t consider NVDA to be a flash in the pan. Although it sounds unreal, the semiconductor firm’s best days are still ahead.
Josh Enomoto is long Bitcoin.
