Nvidia Corporation’s (NASDAQ:NVDA) third-quarter results marked yet another great moment in company history. The graphics and autonomous driving solutions provider posted incredible numbers that justify its 60 price-earnings ratio.
Along with posting strong sales for its graphics hardware, Nvidia spoke about building an AI computer that enables Level 5 driverless vehicles. So, chances are good that the stock will continue rewarding its shareholders in the near future.
Nvidia reported solid results in key areas of its business. Its data center revenue doubled year-over-year to $500 million. That, along with strong adoption of its Volta platform, resulted in revenue growing an incredible 32%, to $2.64 billion. Management predicted revenue of $2.35 billion.
NVDA’s GPU business grew nearly one-third from last year, to $2.22 billion. Revenue from gaming grew 25% to $1.56 billion, as demand for Pascal-based chips strengthened in all its worldwide markets. The GTX 10xx-series GPU will continue to give Nvidia’s overall revenue a strong lift. In early November, the company released the GeForce GTX 1070 Ti.
Nvidia’s product line-up is ready for the holiday season, as it covers the budget (entry-level) market with the GTX 1050. And the GTX 1080 Ti is sure win over the hardcore gamers at this time of the year.
Advanced Micro Devices, Inc. (NASDAQ:AMD) will make a run at NVDA by trying to win market share through Polaris and Vega, but early, negative reviews of Vega may take away some shine from AMD. Polaris GPUs will continue doing well, but sustained, high prices due to its popularity for cryptocurrency mining may hurt AMD’s sales volumes.
Meanwhile, Nvidia benefited from the continued interest in cryptocurrency mining too, enough for the company to sell a dedicated board in its OEM business. Investors should also smile over Nintendo’s success with the Switch Console since NVDA supplies the GPU for it.
Developments in AI Computing
During the third quarter, Nvidia announced the DRIVE PX Pegasus. This is an AI computer that enables Level 5 driverless vehicles. It is tenfold faster than the system it replaces and can process 320 trillion operations in a single second. NVDA already has 25 companies developing autonomous robotaxis — and the company’s AI solutions do not end with automobiles. Next year, DHL is testing autonomous delivery trucks that use the NVIDIA DRIVE PX platform. It is no wonder that Intel Corporation (NASDAQ:INTC) bought MobileEye or that Ambarella, Inc. (NASDAQ:AMBA) is refocusing its business towards advanced driver assistance system (ADAS) solutions.
Growth Expectations for NVDA
The ramping up of Volta will lead to strong data center revenue growth for Nvidia. It already has big names that will support Volta. These include Amazon.com (NASDAQ:AMZN) and Microsoft Corp. (NASDAQ:MSFT). Even in the computer server market, Lenovo, HP Inc. (NYSE:HPQ), Dell (NYSE:DVMT) and others announced they will build servers that utilize the Volta GPU.
NVDA will continue addressing the high-performance computer market, worth around $11 billion. The company represents nearly 15 percent of the world’s top 500 supercomputers, so Nvidia is poised to grow. The deep-learning and hyperscale datacenter markets are the other new markets that Nvidia feels will complement its powerful, high-performance chip business.
Takeaway
NVDA is an attractive investing idea for growth investors. Though the share price is up nearly 150% in the last year and crossed the $200/share level in late October, the stock may continue climbing higher.
Its competitor, AMD, is struggling to grow consistently and is busy launching new products to market. Nvidia’s GPU business is solid, as it continues to branch out and dominate the new markets it enters.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
