Nvidia (NASDAQ:NVDA) does not have a happy stock chart.
Since hitting a low in December, the stock has tried to break out twice. Both times it failed. Nvidia stock price was due to open Aug. 7 at around $153.50. Last October it traded as high as $292.
The company has also had a weak 2019. Its last two fiscal quarters brought in revenue of about $4.4 billion. In fiscal 2019 it had sales of $11.6 billion.
But analysts like Jim Kelleher of Argus Research keep pounding the table for it. Even small investors like me have picked it off the floor (I’m about even on 100 shares bought in May).
What’s going on? Traders will tell you to watch the Aug. 15 earnings release, where analysts expect $1.14 per share, and hope for $1.18, on sales of $2.55 billion.
I’m more patient.
NVDA is the Future
Nvidia’s troubles are mainly down to Bitcoin. Miners bought rigs filled with NVDA gaming boards to create “money” out of math. When that stopped, so did a lot of sales. There’s still market uncertainty, especially in China, and this is a near-term problem for both sales and the stock.
But Nvidia represents nothing less than the future of computing.
During the 2020s, artificial intelligence will be applied to machines all around you to create self-driving cars, appliances that call the repairman, homes that run themselves, diagnostic tools connecting your wrist to the hospital, and virtual worlds that feel like real ones.
That’s just for starters.
The idea of typing on a computer, or even looking at one, will seem quaint. Clouds and devices will truly become one. Millions of jobs will become obsolete. Cities will become more resilient, easier to manage.
Nvidia chips will be at the heart of all of this. Cloud gaming is just a step toward what I can only call cloud living. It’s made possible by data centers with the speed of video game machines, 5G wireless networks delivering gaming-level latency to the home, and home devices adapting to this new speed.
As with everything, it’s going to be a bumpy ride. There’s uncertainty in the near-term outlook. But Intel (NASDAQ:INTC) isn’t about to catch up to Nvidia’s design lead. If anything, it’s falling further behind. Advanced Micro Devices (NASDAQ:AMD) lacks the depth of software NVDA has created to build applications.
Nvidia’s only real competitors by 2022 will be the Cloud Czars themselves. Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) are all working on chips, or have chips, that could deliver some of Nvidia’s promises to their clouds. But that just opens the device market wider. So far Apple (NASDAQ:AAPL) is refusing to work with Nvidia drivers. That will change.
The Bottom Line on Nvidia Stock Price
At its current market cap of $92.3 billion, Nvidia is trading at close to 10 times what I expect for 2020 revenues, and almost 29 times earnings. The dividend, just 16 cents per share, is minuscule.
Don’t sell your cow to buy Nvidia stock. Don’t call your dog NVDA and expect to ride it straight up. Don’t buy it if you need income from your investment.
But NVDA deserves to be in your portfolio, especially if you’re in your 30s or 40s. I’ve got some as back-up for when I’m in my 70s and may need some profit to keep me going.
Nvidia isn’t a trade. It’s an investment. It’s something you buy near its lows, where it is now. Then hang on to for at least three, maybe five, hopefully 10 years into the future.
There aren’t many stocks you can say that about in today’s market. Insurers may blow up, oil may disappear, banks are threatened by fintech, fads come and go. The only thing certain in today’s world is change, accelerating, revolutionary change.
Nvidia chips will be at the heart of it.
Dana Blankenhorn is a financial and technology journalist. He is the author of the environmental story, Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in NVDA, AMZN, MSFT and AAPL.