NVIDIA Corporation (NASDAQ:NVDA) is the pioneer in graphics processing unit (GPU) accelerated computing and remains the market leader in the industry. NVDA stock has been reporting profits that beat Wall Street estimates over the past several quarters.
In fact, NVIDIA reported a 39% increase in adjusted earnings of $0.46 per share in its first quarter—that was $0.14 higher than the $0.32 per share expected by analysts. Its quarterly revenue rose 13% to $1.3 billion year-over-year, which also topped the $1.26 billion forecasted by analysts. (Source: “NVIDIA Announces Financial Results for First Quarter Fiscal 2017,” NVIDIA Corporation, May 12, 2016.)
The company is making its investors very happy with its consistently strong financial performance because its stock price continues to trade higher. Over the past 52 weeks, NVDA stock went up from $20.00 to as much as $58.23 per share, its closing price on August 5.
Will NVIDIA sustain its revenue growth and profitability and keep its stock soaring over the long term? The answer is yes. The company has not just one, but four growth drivers, including gaming, virtual reality, deep learning, and self-driving cars.
Gaming is a Boon for NVDA stock
Bear in mind that NVIDIA is the market leader in GPUs, with almost 80% market share. Its “GeForce” is the number one PC gaming platform, with more than 100 million players worldwide, which is expected to grow, given the strong demand for games.
International Data Corporation (IDC) estimated that the number of PC gamers who are playing at least one hour per week would increase to nearly 700 million by 2019. The research firm noted that free-to-play e-sports games have been attracting hardcore PC gamers. (Source: “Worldwide Digital PC and Mac Gaming 2015–2019 Forecast,” IDC, May 2015.)
NVIDIA will surely get a huge chunk of the market because its GeForce graphics card lineup continues to gain strong momentum. PC manufacturers prefer NVIDIA’s graphics cards because of their better functionality than those of its competitors. The company’s “GeForce GTX” platform is considered the core of the PC gaming industry. Therefore, it is expected to generate more revenue in the future, which means upside for NVDA stock.
NVIDIA is also positioning its gaming business in home entertainment (TV). The company boasts its “NVIDIA SHIELD” as the most powerful “Android” TV box, with 4K streaming, advanced gaming, a growing number of apps, and its game-streaming service “GeForce Now,” which provides the best GeForce GTX experience on the platform.
The company’s annual gaming revenue more than doubled from 2013 to 2016. Its five-year compound annual growth rate (CAGR) was 21%. (Source: “Investor Day 2016: NVIDIA,” NVIDIA Corporation, last accessed August 8, 2016.)
NVIDIA GPU Is Powering the Virtual Reality Industry
NVDA stock is also benefiting from virtual reality (VR), which is transforming consumers’ experiences in computing and gaming. NVIDIA is well positioned to dominate the VR industry because it has the fastest and most powerful GPU on the market.
A number of game developers and headset makers are now using “NVIDIA VRWorks” software to create an outstanding and immersive VR experience for consumers. The company’s GeForce GTX VR Ready program has more than 100 partners around the world.
Take note that NVIDIA “GeForce GTX 980”-powered notebooks are currently the only VR-ready notebooks globally, and every “Oculus”-ready PC is powered by the GeForce GTX GPU. Additionally, some mobile VR and augmented reality (AR) devices are integrated with NVIDIA Tegra processors. (Source: “10 Ways NVIDIA Makes VR a Reality,” NVIDIA Corporation, March 16, 2016.)
Deep Learning Is a Big Deal for NVIDIA
During the company’s recent annual GPU Technology Conference (GTC), NVIDIA CEO Jen-Hsun Huang said that deep learning is not just an app or a field. He believes that deep learning is very important and a big deal that can change the computing industry. (Source: “GTC 2016 Keynote with Jen-Hsun Huang, CEO of NVIDIA,” NVIDIA Corporation, April 5, 2016.)
During the event, the company unveiled “DGX-I,” the world’s first deep-learning supercomputer designed to meet the unlimited demand for artificial intelligence (AI). The supercomputer is based on its “Pascal” GPU architecture and is integrated with the Tesla “P100” GPU to deliver more than 12-times faster training than the four-way “NVIDIA Maxwell” architecture-based solutions. Its computing power is 170 teraflops and is equivalent to 250 servers in a box. The price of the DGX-1 supercomputer is $129,000.
Powerful GPU platforms (including those from NVIDIA) combined with big data and deep neural networks paved the way for the rapid progress of AI. Right now, companies in every industry are focused on AI and deep learning to develop smarter products.
There are 3,409 organizations currently working with NVIDIA on deep learning, which is truly a big deal, not just for the company, but also for NVDA stock investors. AI-powered apps and services are expected to spread rapidly like a wildfire since Alphabet Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG) Google, Facebook Inc (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT) decided to open their deep-learning platforms for everybody. The widespread adoption of deep learning/AI is not just increasing the demand for the company’s GPUs, but it is also sending NVDA stock through the roof.
Self-Driving Cars Could Take NVDA Stock to Higher Levels
NVIDIA’s automotive segment has been generating strong revenue. During its recent quarter, the segment achieved revenue of $113 million, up by 47%. The company is betting on self-driving cars as one of its major growth drivers in the future.
Several major automakers, including Volvo AB (ADR) (OTCMKTS:VOLVY), Audi AG (ETR:NSU), Bayerische Motoren Werke AG (ETR:BMW), Ford Motor Company (NYSE:F), and others chose the “NVIDIA Drive PX2” to develop self-driving cars. NVIDIA said more than 70 companies and organizations were working with its Drive PX platform.
The global auto industry is expected to sell around 21 million self-driving cars and 76 million cars with some level of autonomy by 2035. The first autonomous vehicles are expected to be deployed in the United States, selling several thousand units, in 2020. This is expected to expand to as many as 4.5 million units by 2035, according to the latest forecast by IHS Markit. (Source: “CORRECTING and REPLACING IHS Clarifies Autonomous Vehicle Sales Forecast – Expects 21 Million Sales Globally in the Year 2035 and Nearly 76 Million Sold Globally Through 2035,” IHS Markit, June 9, 2016.)
Given NVIDIA’s leadership in the GPU market, there is no doubt that the NVIDIA Drive PX will be in most, if not all, self-driving cars in the future.
The Bottom Line on NVDA Stock
The company is scheduled to report its financial results for the second quarter of 2017 on August 11. It is expected to report another positive performance and to provide more details regarding its progress on its four growth drivers. There is a big chance for NVDA stock to keep surging because the technological trend is in its favor.