Oct 15, 2020
Is NVIDIA a Great Investment?
OVERVIEW
NVIDIA Corporation is a semiconductor company based in the United States. The company primarily makes graphics chips, GPU’s, and graphics cards. However, they have built stronger computer chips for data centers around the world. They have also built infrastructure for Artificial Intelligence solutions, like autonomous driving and drug discovery around the world.
Why You Should?
- NVIDIA has been active in the merger and acquisition market. Their latest acquisition play came in the form of a 40 billion dollar deal with Softbank to buy ARM Holdings, a company whose infrastructure is in almost every phone around the world as well as other mobile devices like computers. Though this deal might hurt the company’s bottom line, it makes NVIDIA one of the largest semiconductor companies.
- NVIDIA has got most of its revenues from its graphics segments. However, the company has entered new businesses like data centers, autonomous driving, and machine learning. These new businesses are the future of the entire world’s computing needs and NVIDIA will benefit greatly from the ultimate transition to these systems.
- NVIDIA has benefited from the COVID-19 Pandemic due to a spike in video game users around the world. Devices like the Nintendo Switch use NVIDIA GPUs and NVIDIA has also seen a spike in sales for its graphics cards and other video game chips and infrastructure. This growth during a pandemic will help the company’s future growth.
- NVIDIA has seen market share spike in extremely valuable sectors around the world. The GPU industry will see strong growth and will be worth over 200 billion dollars in 2027. The semiconductor industry will also see parabolic growth due to a spike in demand for data center, artificial intelligence, supercomputing, autonomous driving, machine learning, and more. This will benefit NVIDIA’s stock price.
- All of these factors bode well for NVIDIA’s strong future growth. Though the revenue and profit might not show these future expectations, NVIDIA’s current acquisitions, like ARM holdings, position it well for the future of the semiconductor industry. NVIDIA’s stock will benefit if the company can capitalize on this new growth. The company’s reported revenues of around 10.9 billion and profits of around 2.8 billion in the financial year of 2020. In the financial year of 2019, the company reported revenues of around 11.7 billion and profits of 4.1 billion. The financial year of 2020 was tough for them and the company looks to get out of that slump and continue to grow in the future.
Why You Should Not?
- NVIDIA still faces tough competition from several other semiconductor chip companies. Companies like AMD, a company that is also looking to acquire Xilinx (a company with a strong data center market share), Intel, Qualcomm, and others. This competition might hurt NVIDIA’s stock price and future growth.
- NVIDIA currently trades at over 500 dollars a share, which means that it trades over 100 times earnings. I would wait for the stock price to fall slightly before putting money in this great company.
MY OPINION
In my opinion, I think that NVIDIA is a great long-term investment due to its exposure to some of the most valuable and fast-growing businesses, like data centers and autonomous driving, in the world. The COVID-19 Pandemic has further benefited the company’s core business, GPUs and graphics cards, as more people play video games due to the pandemic. However, competition and valuation might hurt the company.
