The technology sector has had a rough start to the year, but one standout has been NVIDIA Corporation (NASDAQ:NVDA). NVDA stock has been on a tear since reporting earnings in mid-February, up about 26% after smashing analyst expectations.
After such a rapid rise, does NVDA stock have more upside?
NVIDIA is at the forefront of several exciting areas in technology and the following three catalysts have the potential to send NVIDIA’s stock higher in 2016.
One of the hottest areas in technology is driverless cars. Alphabet Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), and Tesla Motors Inc (NASDAQ:TSLA) are grabbing most of the headlines these days as they make big inroads into the market. But behind the scenes, these companies need a powerful processor to compute all that road and traffic data. That’s where NVIDIA steps in and stands to benefit in a huge way.
NVIDIA is already a key supplier of processor chips that power infotainment and navigation systems in cars from partners like Volkswagen AG (ETR:VOW3), Tesla, and BMW (ETR:BMW) among a host of others.
But NVIDIA is also aiming to become the leader in self-driving cars. In January, the company announced its “DRIVE PX 2” processor that will power driverless cars. NVIDIA says the processing power is equivalent to that of 150 “MacBook Pros.” (Source: “NVIDIA Boosts IQ of Self-Driving Cars With World’s First In-Car Artificial Intelligence Supercomputer,” NVIDIA Corporation, January 4, 2016.)
Volvo AB (STO:VOLV-B) will already be using the DRIVE PX 2 to power a fleet of 100 self-driving SUVs in the company’s self-driving pilot program.
The auto segment for NVIDIA will be a huge growth driver for years to come. In the latest quarter, sales in the company’s auto segment grew 66% over last year to $93.0 million. (Source: “NVIDIA Quarterly Revenue Trend,” NVIDIA Corporation, last accessed March 3, 2016.)
NVIDIA CEO Jen-Hsun Huang believes that the automotive segment will eventually be a $1.0-billion business for the company. (Source: “Nvidia CEO Sees Automotive Business Growing to $1 Billion,” Bloomberg, June 13, 2013.)
Cloud computing is taking off in a big way and it seems like every tech firm is investing in it in some way. NVIDIA is also finding a way to jump into the cloud by using its graphics clout to power cloud-based gaming services, apps and virtual workstations.
Cloud computing is taking off for NVIDIA and the company is optimistic that there will be high demand for their graphics chips. Huang also said that revenue from cloud computing will hit $1.0 billion in a few years and that growth in the segment will be about 60%–70% every year. (Source: “$1 Billion: Nvidia’s Earnings Forecast For Its Cloud Computing Business,” Tech Times, June 1, 2015.)
NVIDIA’s largest product segment is still supplying its leading graphic processors for gamers. The company recently released its top-of-the-line graphics card, the “GeForce GTX 980 Ti,” which the company is marketing as a great upgrade for hardcore gamers who are still using older graphics cards.
In 2016, its next-generation “Pascal” GPUs will arrive, which Huang said will be 10 times faster than the company’s previous chip. (Source: “Nvidia: Pascal Is 10x Faster Than Maxwell, Launching in 2016,” WCCF Tech, last accessed March 3, 2016.)
NVIDIA’s gaming segment is still growing rapidly. In the latest quarter, revenue hit $810 million, up 25% from the previous year.
The Bottom Line on NVDA Stock
If you’re looking for a leading-edge tech company with lots of growth still ahead, you might want to take a look at NVDA stock.