NVIDIA Corp (NASDAQ: NVDA) has been a high-flyer for quite a while now. In the past 3 years NVDA stock is up more than 570%. But this year to date, it’s managed to return a mere 8.7%.
That begs the question whether NVDA’s glory days are over or whether this is the pause that refreshes.
I’m firmly in the camp of the latter scenario.
NVDA makes graphics processing units (GPUs). Those are cards that render graphics from information. In the early days, NVDA was a niche firm that supplied high-end — usually aftermarket — GPUs to gamers, research labs and any company or organization that needed powerful processors to process large amounts of information.
For example, you might have used Nvidia’s GPUs if you’re an astronomer and you’re organizing data and comparing it those can me massive numbers. Or if you’re a biotech researcher looking to build a molecule and then animate it to see how it reacts to a given drug. Or if you’re playing Call of Duty.
As our online world became more mobile and bandwidth expanding, video became a powerful part of the online experience. And that was a major opening for NVDA.
Today, NVDA is the premier GPU maker for high performance professional equipment in massive sectors like cloud computing, Big Data, driverless vehicles and the Internet of Things. And it’s still a major player in the gaming industry, especially as virtual reality and augmented reality platforms continue to expand.
And, in recent years, as cryptocurrencies have become so popular, many machines used to ‘mine’ currencies are heavily reliant on Nvidia GPUs.
Basically, whenever a major new technology blooms in the tech sector, NVDA is figuring out how to make itself essential. And because of its expanding reputation, the players in the new spaces are more than interested in working with NVDA.
Future Plans for NVDA
In September, CEO Jensen Huang spoke at a major GPU conference in Japan. There, he laid out his 10-year plan for NVDA. It was essentially 3 initiatives the company would focus on and exploit.
The first was to build new hardware to power inference to the next level. Basically, an inference engine is at the heart of artificial intelligence. It is a key component of the system that applies logical rules to the knowledge base to deduce new information. This is what makes ‘smart’ technologies smarter and would have huge implications for all aspects of AI and smart devices.
The second was to power its AGX line of GPUs toward autonomous vehicles and robotics. By aiming for these long-term objectives, it allows NVDA to become a more important players as these technologies develop.
The third was to further develop better medical instrumentation. This is a bold new step for NVDA, but makes complete sense. Western nations’ populations are aging (as well as Japan’s) and this $100 billion industry is becoming bigger over time. Also, automation and robotics are becoming key technologies in this sector.
My Portfolio Grader has a C rating on the stock now, until its fiscal Q4 numbers come in and there’s a bit more clarity on the trade war with China. It’s more a matter of a potentially lower entry point rather than the quality of the company.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, 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.