“The Future of Robotics Is Here,” proclaims the website for Nvidia (NASDAQ:NVDA), one of the leaders of the rapidly expanding field of artificial intelligence. But has the stock price risen faster than the company’s growth potential?

Nvidia makes computer chips, which puts it in competition with other well-established tech titans like Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD). But Nvidia has carved out a niche in the artificial intelligence space, which many analysts believe will be the fastest growing tech sector during the next 10 years.

Growth for NVDA Stock

The company’s Tesla chips are already widely used in the video game, robotics and other industries. Now it has moved aggressively to dominate the AI market by rolling out its HGX-2 platform, which puts together 16 Tesla chips into one server.

Using a proprietary connection technology called NVSwitch, the idea is to combine the chips into one enormous source of computing power.
Nvidia already has partners lined up to use the new platform in their own machines, including top server provider Lenovo (OTCMKTS:LNVGF). The platform is also designed to allow cloud data centers to process even more information. Nvidia’s revenue from data center operations has surged from $150 million two years ago to about $700 million today.

But some analysts are concerned about excess inventory in the tech space. Some see a glut in the market, with one Asia tech company reportedly returning 300,000 GPUs to Nvidia.

The rise of cryptocurrency — a digital asset designed to work as a medium of exchange, like bitcoin — was an enormous boon to Nvidia’s business  in 2016 and 2017, since it takes a tremendous amount of computing power to mine them. But cryptocurrency prices dropped sharply in 2018, causing some analysts to wonder whether Nvidia could shift its production into other areas.

The company’s consistent revenue stream shows that whatever business Nvidia lost in the cryptocurrency market, it has more than made up among video game makers, graphic design professionals and cloud computing centers.

Lots of companies come up with one great idea but prove unable to adapt to changing market conditions. Nvidia has passed its first test in this regard.

The company is also developing new technologies for automotive computing systems, which is expected to be a substantial growth area in the next 10 years, as cars increasingly turn into electronic devices with wheels.

The stock’s price is up over 50% in the past 12 months. Its trailing-12-month price-earnings ratio is now 42 — not unheard of for a rising tech company of this quality, but a sign that some more bad news could cause the stock to tumble.

Nvidia is clearly one of the leaders in a field that may see more growth than any other over the next several years. It does not yet have the solid track record that would make it an obvious pick for a long-term retirement portfolio, but it certainly qualifies as one of the best aggressive growth picks on the market today.

As of this writing, Thomas Scarlett did not own any of the stocks discussed in this article.

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