I don’t have to tell you how well Nvidia (NASDAQ:NVDA) stock has performed these past few months. The novel coronavirus wound up being a tailwind, not a headwind, for the chip giant. Shares more than doubled off their March sell-off lows. But that’s just the start.
Why? Valuation may be rich. But it’s more than justified. With so many growth catalysts in motion and “megatrends” on its side, this powerhouse remains “best in class.” As the pandemic continues to linger, hard-hit stocks like airlines, cruise lines, and retail could continue to be challenged.
Strong growth stories like Nvidia? It’s going to be different. Sure, there may be some hiccups in the near-term. But don’t expect this company’s growth trajectory to change course anytime soon. Demand in the company’s existing end markets (cloud computing, data center, video games) continues to grow. To top it all off, their exposure to emerging technologies like AI (artificial intelligence) and AVs (autonomous vehicles) helps to bolster long-term growth as well.
In short, this remains one of the best long-term investment ideas out there. Don’t let valuation scare you off this opportunity. Even as shares makes new highs, there’s much more left on the table.
How the ‘New Normal’ Will Send NVDA Stock Higher
The pandemic has brought many new buzzwords into the public lexicon. A good example is the phrase “new normal.” For hard hit industries, “new normal” is a bad thing. It means continued challenges as they attempt to bounce back to profitability.
But for names like Nvidia? “New normal” may be a good thing. The coronavirus further accelerated long-term changes in our economy. Be it cloud computing, whose growth was bolstered by large-scale “working from home,” or video games, which have seen tremendous growth as of late, as state-mandated lockdowns made most outside leisure activities off-limits.
In short, recent events have helped, not hurt, this company’s high levels of projected growth. As I said last month, the company now expects sales to grow 34% this year, with earnings seeing a 40% jump as well.
Put it all together, and it’s no wonder this high-flyer as flown even higher these past few months. Not only has NVDA stock passed its pre-pandemic high-water mark. Shares today trade over 20% higher than where they were back in February.
Granted, this stock’s recent strong performance may make you concerned it’s ready to “top out” sometime soon. With shares trading at a forward price-to-earnings (P/E) ratio of 47, I don’t blame you. But you can’t let valuation scare you off this opportunity.
Yes, shares change hands at a premium valuation. But that rich multiple is more than justified. Not just due to continued cloud, data center, and video game end-user demand cementing growth. New technologies quickly gaining critical mass means an even longer growth runway.
Why Future Technologies Extend the Runway Further
The coronavirus may have put many things on hold, but one area it hasn’t put on hiatus is emerging technologies. I’m talking about game-changers like artificial intelligence and autonomous vehicles. In both areas, Nvidia continues charging ahead, opening the door to potential above-average growth through the next decade.
When you hear “GPU,” you probably think of video games, and perhaps other applications like data centers. But, they’re also the backbone for AI applications. While rival Advanced Micro Devices (NASDAQ:AMD) is catching up fast, this company remains the top dog in the GPU game, with about 69% market share.
In short, this company’s dominant position in the GPU space means heavy exposure to AI secular growth trends.
With AVs, the chip powerhouse also continues to make big moves. Take, for example, their recent partnership deal with Mercedes-Benz (OTCMKTS:DMLRY). Nvidia CEO called it “a transformative moment” for the company. With this deal, the company is completing its metamorphosis from video game chip provider, to purveyor of chips for multiple verticals.
In other words, after conquering several end-user markets (video games, data centers), the company is tackling new frontiers. And, with past as prelude, expect them to “crush it” again in these new arenas.
Buy NVDA Stock Now Before It Heads Even Higher
The novel coronavirus did little to derail the growth train for Nvidia. With the “new normal” a tailwind, not a headwind, the company expects another year of above-average growth. But that’s just the start. They’re already crushed it in cloud computing, data centers, and video games.
Now, with growth opportunities in AI and AVs in motion, expect continued blockbuster growth this coming decade. Don’t let a rich valuation make you miss out on this opportunity.
With its premium multiple more than justified, NVDA stock is far from “topping out.” Grab it before it makes new highs.
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.