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Nvidia Stock Is Lacing up Its Boxing Gloves

With AMD GPUs challenging the premium space, NVDA is rumored to hit its rival below the belt

Like many notable technology firms, Nvidia (NASDAQ:NVDA) took quite a beating late last year. Heading into the final third of 2019, Nvidia stock has largely stabilized. However, while being up nearly 32% year-to-date is a positive development, it doesn’t do much to mitigate last year’s losses. That said, NVDA’s ramped up presence in gaming presents an interesting dynamic.

With Nvidia competing in the low-price GPU spectrum, NVDA stock looks quite interesting.
Source: michelmond /

First, PC Gamer’s Joanna Nelius reported that Nvidia’s GeForce Now, the company’s cloud gaming platform, received a “user-friendly redesign.” Upon its beta launch, GeForce Now received much fanfare. However, users complained that the interface was cumbersome and taxing on bandwidth. And when the platform tacked on more than 500 games, usability became a crucial factor.

That’s because as GeForce increases in popularity, gamers want an easy way to select their titles. Nothing ruins a perfectly good service more than a frustrating interface. Thus, this was a smart move for the company and NVDA stock longer term.

Second, the latest rumors indicate that Nvidia will introduce its GTX 1650 Ti graphics card on Oct. 22. The kicker here is that this graphics processing unit (GPU) is a discount offering, relatively speaking. And that only means one thing: Nvidia stock will once again have a high-profile battle with Advanced Micro Devices (NASDAQ:AMD).

Historically, an investment in NVDA stock gave you exposure to higher-end GPUs. On the other hand, up until recently, AMD has been the poor man’s Intel (NASDAQ:INTC). Now, of course, that pejorative description doesn’t fit quite so neatly. As Computex 2019 revealed, AMD is firmly targeting the premium end of semiconductor spectrum.

Subsequently, that opens possible upside for Nvidia stock.

Nvidia Stock to Rise on Competitive Challenge

While Wall Street has celebrated AMD’s dramatic reversal of fortune, the rivals in the space looked on jealously. Over the trailing five-year period, AMD shares have skyrocketed over 819%. Few names come close to this level of performance.

But one of those is actually NVDA stock. Five years ago, NVDA was trading hands for under $19. In the same period above, shares gained over 850%.

That said, AMD has owned the narrative in recent years, in many ways overshadowing Nvidia stock. As a leader in multiple segments, NVDA obviously has a vested interest in reasserting the old status quo.

From a practical perspective, Nvidia has a chance to do exactly that. As InvestorPlace feature writer James Brumley noted, AMD may have rushed some of its chips to development; thus, some of their products may not meet performance benchmarks. That might not matter to casual users. However, for people who require high-end GPUs, any understated performance is a drag. Potentially, this could benefit Nvidia stock from a comparative angle.

Organically, then, NVDA may win over some AMD loyalists in the higher-end GPU space. As for Nvidia’s GTX 1650 Ti, I think it’s a brilliant move. As AMD rolled up its sleeve in the premium space, Nvidia is likely going below the belt, so to speak.

It’s aggressive, gutsy, and somewhat surprising. Better yet, Nvidia can afford it.

Over the years, semiconductors have racked up increasingly higher research and development expenses. That goes for both Nvidia and AMD. The latter increased R&D by 56% between the trailing 12-month period to four years prior, while the former nearly doubled this expense during the same period.

Yet Nvidia due to its larger enterprise currently has superior margins and overall fiscal stability.

NVDA Stock in a Better Position

Understandably, it’s not completely fair to lay out the differing financials as the two don’t serve all the same markets. But practically, Nvidia stock is in a better position for further upside.

Here’s the truth: AMD chief executive Dr. Lisa Su is a genius. She engineered one of the most remarkable comebacks in business. But betting on AMD now is akin to the lightning-could-strike-twice argument. It very well could happen, but it’s probably not likely.

Additionally, AMD had to stretch themselves (rising R&D expenses) to compete with Nvidia and Intel in premium markets. I’m not sure if they can maintain their newfound fiscal stability (relative to prior years) and compete with the alpha dogs.

On the flip side, you have NVDA stock. Here’s a leading semiconductor that took some humbling bruises. But it is still a mean competitor and has ample resources to fight back. Plus, much of the pressure is off because the bad news is baked in.

In the long run, both companies offer relevant products and services. However, if you wanted to gamble on the semis, Nvidia stock gives you less upside resistance.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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