As of late, most investors associate Nvidia (NASDAQ:NVDA) with artificial intelligence (AI) and virtual reality (VR). However, before its most recent boom, investors thought of Nvidia stock as a play on gaming.
Now, an announcement at a recent conference has turned the spotlight back to its original niche.
Nvidia has released graphics chips that will reinforce its leadership in gaming. Since gaming still serves as the foundation of the company’s products, this improvement will improve AI and VR, and by extension, boost the stock.
Graphics Chips and Nvidia Stock
The company has introduced a graphics processing unit (GPU) that will represent a quantum leap in its capabilities. The new line of graphics chips, called the GeForce RTX Series, will work on what experts call Turing architecture.
This will allow ray tracing to occur at a rate 25 times faster than the previous technology. The chips will improve how both light and sound travel in the simulated environments. This should also help Nvidia to maintain its lead over peers such as AMD (NASDAQ:AMD) or Intel (NASDAQ:INTC).
Owners of NVDA should not forget the company’s original gaming niche. The Overwatch League, created by Activision (NASDAQ:ATVI) and brought to ESPN through the efforts of Disney (NYSE:DIS), will turn gaming from a home pastime into a league sport.
Moreover, Tencent (OTCMKTS:TCEHY) and other firms have played an integral role in expanding gaming interest into China. That need could increase the urgency to end to the U.S.-China trade war. At the very least, it could have the effect of exempting Nvidia products from such tariffs.
Better AI and VR
More important, it should reinforce the original technology that the company used to look outside of gaming a few years ago. Like the graphics chips of the past, these GeForce chips will also become useful for AI and VR-related applications.
I think the improvements from Turing architecture will immediately find their way to Nvidia’s non-gaming applications. Hence, by improving gaming, they build on the technology that keeps Nvidia on the cutting edge of tech.
Such improvements become particularly crucial to applications such as self-driving cars. News of accidents of these vehicles has cast further doubt on that technology. Any increase in AI capabilities should help counter that perception.
New Chips Help Nvidia Stock
These changes could also strengthen Nvidia stock. In my article following the company’s most recent earnings report, I discussed how pessimism affected Nvidia The release of the GeForce RTX has lifted company spirits. The stock has already recovered the losses following earnings.
Still, the equity has spent most of the year mired in a trading range. With the increase, the odds of Nvidia moving out of its range to the downside have come down.
Whether the improved GPUs will lift Nvidia out of its trading range to the upside remains unclear. However, I agree with the market’s knee-jerk move into back into Nvidia following this news. Though a move out of the trading range may take more time, I see this chip release as bullish in the long term.
Final Thoughts on Nvidia Stock
Nvidia’s latest GPU improves the company’s gaming capabilities. This ultimately enhances Nvidia’s other lines of business as well as the stock. The GeForce RTX series of chips utilizes Turing architecture.
This will lead to noticeable improvements in how light and sound travel within games. As mentioned before, this should also improve performance in “real life games” such as getting one’s car safely between points A and B.
Although the announcement erased the losses from the recent earnings report, time will tell how quickly this takes NVDA stock beyond its trading range. Either way, this improvement should also help NVDA investors win a competition vital to them, the game of stock market investing.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
