Nvidia (NASDAQ:NVDA) is up about 1,000% in the past three years. That’s pretty impressive.
And what’s most impressive is that its currently trading at a price-to-earnings ratio of 38. Now, granted it’s a chipmaker (basically), so 38 is pretty high. But given the fact that it has gone up a stunning amount and its P/E is far lower than Microsoft’s (NASDAQ:MSFT) P/E, that has had an order of magnitude less growth over the same timeframe, is noteworthy.
The Growth of NVDA Stock
NVDA started as a niche player in graphics processing units (GPUs) in 1993. Basically, GPUs allow computers to convert data into graphical representations, whether those are charts, videos or images.
Back then, this technology didn’t mean too much because the internet was young and processing power and bandwidth were just getting ramped up. As technology matured, the gamers started to become a significant market and were willing to pay for custom GPUs that rendered images faster and better.
Also, Nvidia was already making headway with its high-end GPUs for research facilities from biotech and pharma to astronomy. NVDA had a solid core research audience that would pay and a growing gaming community that was looking for the best equipment.
When mobile started to grow as the next major iteration of the digital revolution, images became even more crucial to all users, not just gamers and researchers. Videos, selfies, YouTube, all sorts of graphics were now showing up on people’s smartphones.
This takes a massive amount of support on the back-end. Server farms are processing all this information and shipping it around. And they’re using NVDA GPUs to do it.
If there is one stock that represents the huge implications in the shift to mobile technology — smartphones, cloud computing, Big Data, streaming video, Internet of Things — it’s NVDA. That’s why its stock has soared. And now that gaming is becoming a global spectator sport, high-end equipment is in even greater demand.
In the last couple years, NVDA was seeing enormous growth for its GPUs because cryptocurrencies like bitcoin were all the rage. But its recent Q2 earnings report noted that those sales are cooling off.
Some panicked when that was announced. But the fact is, its newest Turing-based graphics cards are just hitting the market and they are very impressive. And the gaming community will make up for any lull from crypto traders.
What’s more, as more augmented reality and virtual reality products come to market, Nvidia will be a major player there as well.
The fact is, NVDA isn’t just a chipmaker. It makes performance hardware that is perfectly suited for the next decade of computing. And the fact is, while it’s averaging about 333% growth per year, Nvidia is up only a mere 60% in the past 12 months. That’s a good sign that NVDA stock isn’t getting too far ahead of itself. And that this kind of double-digit growth is sustainable for a long time to come.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, 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.
