Nvidia (NASDAQ:NVDA) is a company with a lot going for it. NVDA stock is a proven performer that’s put on a clinic in long-term growth for investors over the past 5 years. If you’d bought an Nvidia share at this time in 2016, you’d be looking at a 1,141% return. That’s nothing short of incredible, especially when you consider the fact that this is not a meme stock.
So far in 2021, Nvidia is up 58%. It has clearly earned its place on my earlier list of semiconductor stocks surging from the global chip shortage.
NVDA’s growth trajectory has been sustained over the past 5 years — save for a hiccup in late 2018 (I’ll return to that shortly). That makes it a pretty safe bet for ongoing growth. The latest good news for investors was the announcement last Thursday that the company is partnering with Electronic Arts (NASDAQ:EA) on Nvidia’s streaming gaming service, GeForce NOW.
NVDA stock popped on the news, and understandably so.
Nvidia Announces Expansion of Partnership With EA on GeForce NOW
On Sept. 30, Nvidia announced that Electronic Arts would be expanding its participation in GeForce NOW, Nvidia’s cloud gaming service. EA will be bringing over hit games, including Battlefield 1: Revolution, Apex Legends and Dragon Age: Inquisition.
NVDA stock popped about 1% on the news. Not a huge market reaction, but a definite thumbs-up.
About GeForce NOW
GeForce NOW doesn’t get a lot of ink compared to Nvidia’s other ventures. The constantly in-demand GeForce RTX 30 series graphics cards for PCs and the company’s rapidly growing data center business get most of the attention.
But GeForce NOW combines elements of these two markets to create a whole new one the company is now attacking. Cloud computing and Nvidia GeForce graphics opens up a big opportunity in cloud gaming. AAA video games are hosted on Nvidia’s servers, allowing players who lack powerful gaming PCs to play the games. You can play a demanding game like Dragon Age: Inquisition on a Chromebook or smartphone.
Nvidia says GeForce NOW membership has more than doubled over the past year. Its games stream from 30 data centers to gamers in over 70 countries. The EA deal only makes GeForce NOW even more attractive.
There are millions of gamers out there who would never be able to afford the PC and GeForce RTX card needed to play today’s AAA games. But Nvidia is getting $9.99 per month out of a growing number of them for a GeForce NOW subscription.
Bottom Line on NVDA Stock
While the Nvidia long-term growth story looks solid, there are potential issues that could derail it, at least for a short period.
As I mentioned earlier, late 2018 was a rough year for Nvidia. A cryptocurrency crash left the company and the market swimming with surplus video cards, and led to NVDA stock crashing.
I wrote in July that the company has taken measures to lessen the impact of cryptocurrency volatility on its bottom line. Some risk still remains there, but 2021 is not going to be a repeat of 2018 for NVDA stock.
Also of concern is that fact that Nvidia is a fabless semiconductor company. Nvidia designs chips, but relies on other companies with foundries to produce them. And these are the same foundries that are at the heart of the semiconductor shortage. Nvidia has largely escaped the effects of the problem, but it could still sting the company.
There’s also Nvidia’s highly publicized blockbuster deal to buy custom chip designer Arm. The $54 billion deal has been undergoing very tough scrutiny. E.U. antitrust antitrust investigators are expected to issue their ruling on Oct. 13. After that, it still has the hurdle of Chinese approval. While winning the deal would be another shot in the arm (no pun intended) for long-term NVDA stock growth, any damage, should the deal collapse, is likely to be short-term market reaction.
In short, NVDA is a Portfolio Grader “C” rated stock — most of its potential pitfalls are likely to cause only short-term pain. The company’s deal with EA for GeForce NOW game streaming is just the latest in a long list of Nvidia wins. And it’s another indicator of why the long-term growth story is far from over.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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