The trade war between the U.S. and China has been hard on many U.S. companies but it has been especially difficult for the semiconductor industry. Chipmakers like Nvidia (NASDAQ:NVDA) rely heavily on the Chinese market so the trade war created additional uncertainty for these companies — and Nvidia stock.
In short, Nvidia stock has been all over the place over the past year. 2018 was a breakout year for the company and a year ago, NVDA was nearing $300 per share. The stock is down 32% since then and it started 2019 at a new 52-week low of $124.46.
However, the overall sentiment from analysts seems to be mostly positive when it comes to Nvidia. According to TipRanks, Nvidia stock is considered a moderate buy. 20 analysts gave the company a buy rating and the average price target is $189.27.
The trade war will continue to cause headwinds for NVDA and no one knows when that situation will improve. But if you take a long-term perspective when it comes to NVDA stock, there are signs that the chipmaker can turn things around.
Nvidia Stock is Recovering From Crypto-Mining Crash
Nvidia’s rocky year can’t entirely be blamed on trade war problems. The chipmaker has been recovering from the 2018 crypto-mining crash that left it with an excess of inventory and declining sales.
Of all the companies affected, the crash hit Nvidia the hardest, in part because it focuses solely on graphics processing units (GPUs). The company’s GPUs are used for competitive gaming, data centers, and the automotive industry. Its competitor, Advanced Micro Devices (NASDAQ:AMD) also sells CPUs so the crash didn’t affect it in the same way.
The most recent earnings report showed that the company’s fundamentals are starting to improve. Nvidia experienced growth across all of its segments. And while revenue still isn’t back to where it was a year ago, this signals that the company is beginning to turn things around.
NVDA’s Automotive Business Shows Promise
For investors, one of the bright spots of Nvidia’s most recent earnings report is its growing automotive segment. Its revenue grew by over 30% during the most recent quarter. This segment is still just a small percentage of the company’s total business but there is significant potential there.
Self-driving vehicles are inevitable and Nvidia’s GPU chips can power these systems. Of course, there’s still a lot of work to do before self-driving cars are ready for the road. But companies are investing a lot of money in this industry so it provides an incredible long-term opportunity for Nvidia.
Nvidia’s Gaming Strength is Returning
Nvidia’s real strength is in its gaming segment and it’s where the company makes most of its revenue. Last year, the company released an updated version of its graphics cards which used a technology known as ray tracing. This technology improves the images in online gaming.
Nvidia’s gaming revenue is slowly starting to bounce back, though it’s still down from a year earlier. This should continue to improve during the second half of the year as the holidays approach.
All in all, the company isn’t out of the woods just yet and the current market volatility could cause Nvidia stock to fall again. But the company has many opportunities it can capitalize on. This could make it a good long-term growth stock.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned stocks.