Lots of Room for Growth for NVDA Stock
NVIDIA Corporation (NASDAQ:NVDA) stock has been flying high. Over the past year, NVDA stock is up a whopping 65%, hovering near its all-time high. After an impressive run like that, investors may want to wait for a pullback. But there are also a number of catalysts that could send NVDA stock higher. Here are a couple of catalysts that Nvidia has in the works that could keep NVDA stock soaring.
Nvidia no longer just makes graphics chips for high-end PC gaming machines. In recent years, the company has realized that it can make chips for emerging technologies. As such, one area Nvidia is making a big push into is the autonomous vehicle market.
The driverless car is one of the hottest areas in tech right now. Almost every major car company is working on one. Even tech giants such as Alphabet Inc (NASDAQ:GOOG), Baidu Inc (NASDAQ:BIDU), and Apple Inc. (NASDAQ:AAPL) are working on one or are rumored to be working on one.
And it’s no wonder. They are all trying to get in on a market that will be worth about $42.0 billion by 2025 and may potentially account for a quarter of all global auto sales by 2035. (Source: “Driverless-Car Global Market Seen Reaching $42 Billion by 2025,” Bloomberg, January 8, 2015.)
Driverless cars need a powerful chip to process the enormous amount of data that will be transmitted through various sensors and arrays and that’s where Nvidia comes in. The company is marketing its “Drive PX 2” processor as the best option to power driverless cars, which has a processing power equivalent to that of 150 “MacBook Pros.” It can also handle up to 12 camera inputs, LiDAR (a technology that measures distance with a laser light), radar, and ultrasonic sensors. (Source: “NVIDIA Boosts IQ of Self-Driving Cars With World’s First In-Car Artificial Intelligence Supercomputer,” NVIDIA Corporation, January 4, 2016.)
Nvidia has already partnered with many car manufacturers such as Mercedes-Benz, Audi AG, Porsche, Bentley Motors, Tesla Motors Inc (NASDAQ:TSLA), and Honda Motor Co Ltd (TYO:7267). The graphics chipmaker also announced that Volvo AB (STO:VOLV-B) is already using the Drive PX 2 to power a fleet of 100 self-driving SUVs in the company’s self-driving pilot program.
Nvidia’s auto business only accounts for 6.6% of the company’s total sales, but it’s also the company’s fastest-growing segment. The auto business has the potential to be a huge growth driver for NVDA stock for years to come.
At its core, Nvidia is a PC-gaming company. Its largest business segment is supplying its leading graphic processors for gamers—a market that it dominates. As of the third quarter of 2015, Nvidia held a commanding 81.1% share of the market for discrete graphics cards. (Source: “GPU Market Share Results For Q3 2015 – AMD and NVIDIA See Increased AIB GPU Shipments as PC Gaming Market Grows,” WCCFtech.com, last accessed April 26, 2016.)
But the next hot area in gaming is virtual reality (VR), and the technology is perfectly fitting for Nvidia. The industry is just starting to get off the ground, but virtual reality could become an $80.0-billion industry by 2025. (Source: “Virtual Reality Could Become an $80 Billion Industry: Goldman,” CNBC, January 14, 2016.)
Nvidia isn’t going to make VR headsets, but the company will be supplying the graphics chips needed to power the headset. Right now, if you purchase an “Oculus Rift” headset, you also need to purchase a separate “VR-ready” computer. On its web site, Oculus is recommending specific computers to customers that are “Oculus ready,” such as PCs that are either equipped with Nvidia’s “GTX 970” graphics card or Advanced Micro Devices, Inc.’s (NASDAQ:AMD) “R9 290” card.
Chances are most serious gamers will opt for Nvidia-equipped machines. A recent report shows that three out of four gamers own an Nvidia graphics processing unit (GPU). (Source: “NVIDIA/AMD Market-Share Graph Shows 3 Out of 4 Gamers Own an Nvidia GPU,” WCCFtech.com, last accessed April 26, 2016.)
As virtual reality continues to grow, look for the technology to significantly add to Nvidia’s growth over the next few years.
The Bottom Line on NVDA Stock
For a company that started out supplying PC graphics chips, Nvidia sure has a lot of growth ahead of it in many exciting areas. I’ve outlined a couple of them—driverless cars and virtual reality—which should be a boon for NVDA in the coming years.