In terms of opportunities in the coming decade, the journey has just begun for Nvidia (NASDAQ:NVDA) stock.
The sale of graphic cards is the key revenue and cash flow driver in 2019. However, that is likely to change significantly in the coming decade.
This article will discuss the big opportunities for Nvidia, is a prime stock to buy on any dip.
Big Opportunity in Autonomous Cars
I believe that developments in the automotive sector will provide exciting growth opportunity for Nvidia in the coming decade.
Very specifically, autonomous vehicles will continue to witness robust growth in adoption in the coming years. With end-to-end hardware solutions for automakers, Nvidia is well positioned to witness sharp growth in the automotive segment.
Le’ts look at the market size:
- Nvidia believes that there is a $30 billion market opportunity by 2025.
- Research & Market expects fully autonomous car market in North America to grow at a CAGR of 17.1% during 2023-2030. The market size is pegged at $52.3 billion by 2030.
- Research & Market expects fully autonomous car market in Europe to grow at a CAGR of 18.4% during 2023-2030. The market size is pegged at $191.6 billion by 2030.
Nvidia is already making inroads in the market. Volvo will partner with Nvidia for self driving cars and trucks. The cars will be equipped with Nvidia’s AGX Xavier, which is a supercomputer for vehicles.
Similarly, Audi will be using Nvidia’s Tegra X1 processor, which provides intelligence needed for piloted driving. Toyota has also partnered with Nvidia for self-driving cars. Toyota will be using the company’s end-to-end solution.
The key point I want to make through these facts is that there is a big market for self-driving cars. Importantly, Nvidia has already made inroads with partnership and association with big automobile manufacturers.
This places Nvidia in a sweet spot as the autonomous vehicles market gains traction in the coming years.
It is important to note that driverless cars are also fuel efficient with potentially lower greenhouse emission. With escalating concerns on global warming, there will be bigger investments in the driverless cars segment.
Artificial Intelligence Market Growth
The use of artificial intelligence in the autonomous car market is just an example of application in one industry. As an example, the use of artificial intelligence in the construction market is expected to reach $4.5 billion by 2026.
The key point being that Nvidia’s hardware has a broader application in industries and this creates immense market opportunity. According to Stastica, the global AI-driven hardware market will witness revenue growth from $19.63 billion in 2018 to an expected $234.6 billion by 2025.
Clearly, Nvidia has opportunities beyond the automotive sector and this will add to the company’s revenue and cash flow growth in the long-term.
Concluding Words on Nvidia
I am bullish on Nvidia stock for the long-term and even for the foreseeable future.
I believe that the company’s acquisition of Mellanox will deliver results in terms of triggering revenue growth. It is worth noting that datacenter revenue for Nvidia jumped by 52% from $1.9 billion in FY18 to $2.9 billion in FY19.
According to the company, the HPC server market was $37 billion in 2018 and the market size is likely to increase to $50 billion by 2023. This provides immense growth opportunity for the merged business segment.
Amidst these positives, Nvidia does face competition in the gaming segment from Advanced Micro Devices (NASDAQ:AMD). The price war can imply some pressure on margins for Nvidia. While this can be a potential near-term concern, I believe that positives related to AI and data centre growth can offset this possibly negative trigger.
Overall, Nvidia stock is a “buy” and I believe that it’s an investing stock than a trading stock. Any small correction should be used as an opportunity to accumulate.
As of this writing, Faisal Humayun did not hold a position in any of the aforementioned securities.
