3 Reasons Nvidia Stock Is a Great Long-Term Buy

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nvidia stock - 3 Reasons Nvidia Stock Is a Great Long-Term Buy

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Despite another strong quarterly earnings report last month, shares of Nvidia Corporation (NASDAQ:NVDA) have had trouble rallying. That’s not to say Nvidia stock has done bad by any means. Shares are very, very quietly up 38% on the year and 50% over the past 12 months.

For any other stock that’s incredible, right? Considering that Nvidia stock is up more than 1,000% over the past three years though, 2018’s gains seem mild in comparison.

This slow-but-steady rise is giving investors a great opportunity to load up on an incredible company though. Let’s explore why Nvidia is such a great buy going forward. (Note: In this article we don’t cover how to trade NVDA stock price. Luckily though, we just covered that as part of our top stock trades story, found here.)

#1: Nvidia Stock and Its Current Business

Last quarter, everyone seemed distraught over its disappointing cryptocurrency business. Because graphic cards are used to mine cryptocurrencies, Nvidia, Advanced Micro Devices (NASDAQ:AMD) and others have been benefiting from the rise in popularity.

Management is no longer baking any crypto revenue into its outlook, but that’s not hurting the main businesses. Last quarter, data-center revenue grew 83%, gaming grew 52%, professional visualization grew 20% and automotive grew 13%. Overall, revenue grew 40% and GAAP earnings grew 91% year-over-year.

Last month, Nvidia introduced Turing, the world’s first ray-tracing GPU that it expects will continue to drive these stellar results. These are hardly the results of a struggling business.

#2: Nvidia Autonomous Driving

A lot of people like to write off the autonomous driving revolution. Many believe that these vehicles are unsafe or unrealistic (or both). They don’t realize how companies like Nvidia are using artificial intelligence and machine learning to leverage advancements in these systems and how we’re really just a few years away from seeing a huge wave of A.I-based automobiles.

I’ve had the pleasure to speak with Danny Shapiro several times. He’s the senior director of automotive with Nvidia and has made the situation crystal clear.

From a safety standpoint, there’s no comparison. More than 90% of car accidents are caused by human error and in the U.S. alone, there are almost 40,000 deaths per year. While autonomous driving systems still have a way to go, they will be leaps and bounds safer than the average driver. Doubters can deny it all the want, but it makes too much sense from multiple angles — safety, efficiency and cost — to ignore self-driving cars.

That’s why everyone from Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) to General Motors (NYSE:GM) is getting involved.

Nvidia won’t be left out of the mix. It’s DRIVE Pegasus and Constellation platforms will make autonomous driving a reality for many companies, both big and small. The company’s smaller platforms make bringing A.I. inside the car a piece of cake too. We can see this in Mercedes’ quickly growing MBUX infotainment system.

That’s likely what’s helping to drive Nvidia’s auto revenues to new records, as the $161 million in sales last quarter was a new high for the company. Daimler (OTCMKTS:DDAIF) (the parent company of Mercedes) and Bosch have already selected NVDA to power the companies’ autonomous driving mobility service. They likely won’t be the last.

#3: NVDA’s Opportunity in Artificial Intelligence

It’s hard to credit any one individual thought from the above passage to Shapiro. I’ve been able to sit down with him several times, sometimes talking about in-depth autonomous driving nuances — such as how users of Constellation can change the angle of the sun or time of day and test against thousands of improbable and hard-to-find scenarios millions of times on a simulated server — to goofing around in virtual reality arcades.

One discussion that came up? Reading.

Forget cars, we said at lunch one day in Detroit, what about all the other fields artificial intelligence can leverage? Okay, so we didn’t say “forget cars,” but the lunch part is true and so is the conversation.

Just like an A.I.-powered self-driving system can put together thousands of small patterns and data points and determine what to do — stop, accelerate, swerve, etc. — the same principles apply to other industries.

In healthcare for example, he explained how an A.I.-powered machine could scan someone’s face and because of the thousands and thousands of previous scans it’s performed in the past, it can detect whether a patient has or may have skin cancer. This is all based on thousands (or maybe millions) of seemingly unrelated data points. They may appear random and jumbled to our observations. But to a machine capable of trillions of operations per second, there are trends and connections.

It reminded me of a story of an A.I.-machine scanning patients’ retinas and identifying early onsets of Parkinson’s. Seriously!?

Shapiro didn’t say Nvidia specifically is behind these technologies. But based on its work in the auto industry and A.I.’s reliance on powerful GPUs, Nvidia will be a huge winner thanks to A.I., no matter the industry we’re talking about. That’s what makes Nvidia stock such a good long-term bet, even after its monstrous, multi-year run.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long NVDA and GOOGL. 

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2018/09/3-reasons-nvidia-stock-great-long-term-buy/.

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