While Nvidia (NASDAQ:NVDA) got caught up in the selling pressure last month, the rebound has been intense. Investors realize NVDA stock is a best-in-breed stock that was trading far too low for what it brings to the table. In essence, it was a discount many couldn’t pass up.
We don’t say that about too many stocks or the market as a whole. However, in the case of Nvidia, this company is simply too high quality to pass up, even when volatility is high and uncertainty is seemingly everywhere.
There are a lot of reasons to buy NVDA stock, but here is the main one: it’s the backbone of tomorrow’s technology.
Breaking Down Nvidia
The S&P 500 hit an all-time high on Feb. 19 before beginning what has now become quite the correction. For its part, Nvidia topped a day later, on February 20th, and was still riding high on an impressive earnings report on February 13th.
Nvidia beat on earnings and revenue estimates, with the latter growing 40% year-over-year. After a frustrating year due to a cryptocurrency overhang, investors could finally say, “Nvidia is back, baby!”
Of course, that bullish tone — which sent NVDA stock to new all-time highs — quickly vanished, with shares getting caught up in the selloff. The stock went from a high of $316 in February to a low of $181 in March. However, that type of decline is an opportunity, and investors would only be so lucky to scoop up Nvidia at $200 or lower again.
Long-Term Drivers for Nvidia
Diversification is one of Nvidia’s best attributes. While it is a tech company, it has multiple business units that address multiple industries. Gaming, data center, edge computing, automotive and professional visualization all offer various short- and long-term drivers.
For instance, autonomous driving gives Nvidia a long-term catalyst as the technology continues to evolve. The company has built an ecosystem around self-driving capabilities that draw customers large and small — ranging from mega producers like Mercedes and Toyota (NYSE:TM) to universities and startups.
It will be an important business segment for years and likely decades to come.
On the flip side though, gaming, data center and edge computing are driving Nvidia higher right now. With the novel coronavirus disrupting the way workers and the public perform tasks and consume information and entertainment, Nvidia is being called on again and again.
As demand balloons for the internet, streaming video, social media and remote conferencing, demand increases for Nvidia’s data center and edge computing products. This can be seen elsewhere, too. Digital Realty (NYSE:DLR), a data center real estate investment trust, has held up well, hitting new 52-week highs in the past few days. Fastly (NYSE:FSLY), an edge-computing company, has been roaring back to life from its lows.
As the internet strains to keep up with demand, demand for Nvidia remains strong. Then of course, its largest business unit is gaming, which is doing well too. With gamers stuck at home, there’s a clear catalyst for this segment to thrive in the current environment. It helps that gaming had momentum before the coronavirus began sweeping across the globe, but the outbreak certainly hasn’t hurt.
In short, this pandemic has the public flooding to technology, the backbone of which is powered by Nvidia.
The Bottom Line on NVDA Stock
When Nvidia reported earnings, the company said it expects a $100 million impact on revenue due to the coronavirus. However, guidance at the midpoint of $3 billion still came in well-ahead of consensus estimates. Obviously the global landscape has changed significantly since then, so one can only guess as to what the impact will actually be.
However, management was accounting for the virus and acting accordingly. Based on that guidance, business is still booming for the company. For that reason, NVDA stock is still set to be a long-term winner.
Mellanox will make Nvidia that much more attractive. A few weeks ago, reports surfaced that the two parties have come to agreement with Chinese regulators, the last hurdle for Nvidia closing the $6.9 billion deal. Remember, Nvidia said the Mellanox deal will be accretive to earnings, gross margins and free cash flow immediately.
For long-term investors, this is music to their ears.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.