NVDA Stock Is on the Rise, Partly Thanks to Tesla
NVIDIA Corporation’s (NASDAQ:NVDA) stock jumped by almost 16% in after-hours trading following a report of 53.6% growth in quarterly revenue, which was aided by signing a deal with Tesla Motors Inc (NASDAQ:TSLA) to produce car chips.
NVDA stock benefited from the company’s graphics processing units business, which accounts for about 85% of its total revenue. This part of NVIDIA grew by 52.9% to $1.70 billion in the quarter. But the company has increasingly expanded into industries other than computer graphics cards, including virtual reality (VR) and chips in self-driving cars. The company even got on board with Tesla recently, signing an agreement to supply chips for Tesla’s “Autopilot” system. This helped send the automotive section of the business’s revenue up 60.8% to $127.0 million.
However, growth was still largely driven by demand for the company’s graphics processing chips used in personal computers and data centers. NVIDIA also increased its quarterly dividend to $0.14 per share from roughly $0.12 per share and also authorized an additional $2.0 billion under its buyback program. (Source: “Nvidia posts biggest quarterly revenue growth in six years; shares soar,” Reuters, November 11, 2016.)
According to estimates by the Thomson Reuters Corp (NYSE:TRI) Institutional Brokers’ Estimate System (I/B/E/S), analysts on average were expecting a rise to $1.69 billion.
This is all coming as NVDA stock prepares for Q4, which will see some gamers rushing to purchase heavy-duty graphics cards in order to run recently released titles like Battlefield 1 and Call of Duty: Infinite Warfare, both of which were released within the past three weeks. The holiday season is also certain to see game sales go up, and where there are game sales, there are NVIDIA chips to help run them, waiting to be purchased.
NVDA stock has had a rocking 2016, with share prices up 105% since the beginning of the year. The stock did fall during day trading by about three percent, following the trend of other tech giants on the day, but otherwise NVDA has had a strong run this year, with today’s earnings report only further cementing the impressive run by the company.
What’s really fascinating about NVDA stock is that, despite the impressive growth in its computer graphics business, its other, newer business arms, like car chip manufacturing, are booming as well. Whether this developing industry will be affected by the President Trump administration will be worth keeping an eye on.