Nvidia (NASDAQ:NVDA) began the last decade as a small maker of graphics processors for video gaming. It starts this decade as the leading stock for Cloud 2.0.
The same technology that let you kill the bad guys in Call of Duty is what’s needed to bring artificial intelligence to the cloud and create the Machine Internet.
That means the coronavirus, which has sent Nvidia stock from nearly $315 per share to its March 11 opening bid of about $253, offers a great opportunity for young investors.
Make no mistake, Nvidia is still expensive. The $155 billion market cap is 14 times last year’s $11 billion in revenue.
But the company is no longer a secret. The shares were at $20 less than five years ago. They’re up for a reason.
The Machine Internet
The Machine Internet is one of three great trends that will define the current decade.
Any device that can be controlled over wi-fi will be part of the Machine Internet. Your car, your washing machine, even your heart, can be monitored by sensors, controlled by software and let you know when things are close to breaking before that happens. I began writing about this as “Always On technology” in 2003, spoke about it at Stanford in 2004 and now it’s finally here in our every day lives.
For machines to do this accurately, they need software and clouds that operate with near-zero latency. That’s what Nvidia is working to build, most recently by buying Swiftstack, whose software does object storage. The acquisition will let Nvidia deliver artificial intelligence, required for Machine Internet applications, at scale.
Nvidia Graphics Processor Units (GPUs) are at the heart of it all. They represent 87% of the company’s revenues, and are used not just in cloud data centers, but in edge devices as well.
Gaming is the perfect testbed for this low-latency, fast-acting technology. Gamers are the high end of the PC market, always ready to pay for something faster and more realistic. When Nvidia rolls out graphics processors with nearly 8,000 separate processing cores inside them, the continued growth of gaming means there will be demand.
Finding an Entry Point
Once a silicon chip is designed and a fabrication plant can make it, things happen fast.
Nvidia is “fabless” because it has no manufacturing plant. Its chips are made by Taiwan Semiconductor (NYSE:TSM), which has overtaken Intel (NASDAQ:INTC) to become the world’s best chip maker. CEO Jensen Huang was born in the historic Taiwanese capital of Tainan in 1963.
That’s why every Investorplace writer I know, not just yours truly, considers Nvidia a core holding. Take it from Brad Moon or Will Ashworth. Trust Chris Tyler or Matt McCall. David Moadel and Louis Navellier are also pounding the table for this stock.
The path to the future is clear. Extend the cloud to the network edge, using graphics processors, wireless networks and software. Stop thinking of the Internet as something that’s just used by people and start treating it as essential infrastructure for devices of all kinds.
The Bottom Line
There are enormous opportunities here for a lot of companies, not just Nvidia.
Cloud Czars like Microsoft (NASDAQ:MSFT), microcontroller companies such as STMicroelectronics (NYSE:STM) and a ton of software start-ups still looking for their first angel investors are going to transform the world over the next 10 years.
There are few sure things in this new market. Nvidia is one of them. Let the panic settle, and then pounce. Put the shares away and let time work its magic for you.
Like me, you’ll be glad you did.
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in NVDA and MSFT.
