Just when you think it can’t get any bigger, Nvidia (NASDAQ:NVDA) proves you wrong. NVDA stock has climbed 94% in 2020 despite the novel coronavirus tearing down countless other companies. And the growth narrative is just getting started, as two new catalysts lie around the corner.
Specifically, Nvidia is grabbing more attention because of a possible acquisition of semiconductor giant Arm and rising anticipation of its next-generation GPU reveal, expected in three weeks.
But these aren’t the only catalysts NVDA stock has going for it.
The company is a key player in autonomous vehicles and artificial intelligence. Innovations in disruptive movements like these also place it among the promising 5G stocks to buy.
After all, Nvidia is building alongside what InvestorPlace advisor Matt McCall calls the “5G Highway.” That means it isn’t building the infrastructure to enable the biggest technological developments. Rather, it will use 5G to lead the ground-breaking innovations.
This is largely why NVDA stock has managed to stay on investors’ radars for years despite its high valuation. But are these two new catalysts enough to keep the growing concerns at bay?
The Arm Acquisition Would Be Huge for Nvidia
Arm is a leader in the semiconductor world. Its influence is so profound that “[o]ver 90% of all smartphones and a third of all networking equipment run at least one Arm-designed chip.” While Softbank (OTCMKTS:SFTBY) acquired it in 2016, reports indicate that it might be sold to Nvidia for $55 billion.
The impact of this deal on NVDA stock would be massive. It would enable the company to greatly expand its influence in the tech world by adding mainstream mobile technologies to its portfolio.
Analysts speculate that while the deal could lead to short-term pain (a hefty amount of debt and inevitable antitrust accusations), it should ultimately prove profitable. According to Motley Fool analyst Leo Sun, “NVIDIA’s purchase of ARM would significantly reduce its dependence on GPUs, which generated 87% of its sales last year, and match Qualcomm’s licensing might by taking a cut of every ARM-based chip sold worldwide.”
The Arm deal would allow Nvidia to branch out into mobile, where Arm’s chips are the norm. In this process, it would gain a new revenue stream that might “boost its annual revenue by over 10%.”
Mobile is a lucrative space where Nvidia has struggled to gain marketshare in the past. Any success there should add to the bullish case for NVDA stock. But this new catalyst gains greater value with the company’s upcoming GPU reveal in the mix.
New GPUs Could Prove Highly Profitable
At this point, the Arm acquisition is not guaranteed. However, Nvidia has had long-term success in the GPU market, and that’s likely to continue for several reasons.
First, Nvidia’s GPUs are a go-to favorite among PC gamers. Steam data indicates nearly 75% of its users use Nvidia GPUs. Many analysts think this will turn into a strong catalyst as we approach the next generation of gaming.
While the next-generation consoles by Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) use Advance Micro Devices’ (NASDAQ:AMD) technology, the higher hardware demands of new games should lead to an upgrade cycle for PC gamers. After all, the same Steam data shows that only 10% of PC gamers currently use hardware that matches the strength of next-gen consoles. This should lead to continued success in GPU sales (Nvidia’s primary revenue source).
Secondly, record-breaking success in the video game industry during the pandemic has amplified the hype around its upcoming GPUs. The general increase in gaming activity and inevitable upgrade cycle should strengthen NVDA stock. That’s almost guaranteed success with or without the Arm deal.
Nvidia’s focus on developing more powerful GPUs for gaming and data centers also ties into its strength as a 5G stock. Even without Arm, it’s already the kind of revolutionary stock McCall identifies with his 5G Highway Super Portfolio.
But Nvidia’s new GPUs don’t just help promote its leadership position. They could cement it for years to come, if their debut stuns investors. This would make it an even greater catalyst.
There are rumors that the new cards are more affordable than previous generations. If this is true, it should help Nvidia gain an even greater share of PC upgrades. Remember? According to Steam data, 90% of PC gamers are due for an upgrade.
The Bottom Line on NVDA Stock
Nvidia has continued to prove itself as one of the “Big Tech” companies that won’t stop growing. If the Arm acquisition goes through, it will expand its portfolio into yet another hot space: mobile technology. But even without this buyout in the mix, there’s reason for optimism.
The inevitable upgrade cycle by PC gamers with the debut of new consoles and release of new Nvidia chips alone is a strong short-term catalyst for NVDA stock. The company will continue its developments in high-tech revolutions — driverless cars and AI advancements, to name a few — with or without Arm. Its substantial GPU revenues will help guide it into its future as one of the key 5G stocks to buy.
That isn’t to say that you shouldn’t be wary of the valuation concerns alluded to earlier. It’s just that Nvidia’s future seems brighter than ever with these two short-term catalysts factored in.
But if you’re looking for the most profitable stocks to buy on 5G prospects, Nvidia is just the tip of the iceberg. Investors can discover the “Amazon of 5G” … the “Microsoft of 5G” … and the “Netflix of 5G” in new companies developing revolutionary technologies to make the most of our hyper-connected future.
Matt McCall — the chief technology analyst at InvestorPlace — has curated The 5G Highway Super Portfolio … a tactical approach to investing in 5G that maximizes short-term and long-term gains. In his special report, he uncovers the 5G equivalents of the hottest tech behemoths and more.
With a proven track record in making calls on then up-comers Amazon (4,147% gain), Microsoft (45,371% gain) and Netflix (27,713% gain), McCall and his research team have demonstrated the know-how needed to sift through the 5G duds to find the real gems. He’s found companies at the forefront of key 5G revolutions: movements in driver-less cars, virtual reality and remote surgery … just to name a few.
Robert Waldo has been a web editor for InvestorPlace.com since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.
