NVIDIA Stock Outlook
NVIDIA Corporation (NASDAQ:NVDA) seems to have read Robert Greene’s 48 Laws of Power because its latest move reminded me of Law #15: “Crush Your Enemy Totally.” Not only is this a good thing for NVIDIA stock, but it could single-handedly drive the NVDA stock price to $200.00.
Let me explain…
NVIDIA was in the right place at the right time.
Its signature microchips are great for driverless cars, Bitcoin mining, and the Internet of Things (IoT), but that was not their original purpose. They were designed for gaming.
Only in the last few years have tech companies realized the full potential of NVIDIA’s graphics chips. These graphics processing units, or GPUs, are a better match for “intelligent” software than traditional CPUs.
It is like if you bought some farmland, hoping to grow crops, but later realized that there was an oil reserve beneath your property. You got lucky.
At that point, it’s up to you to extract the oil, contain it, and ship it. Law #15 is a good reminder that companies should press their advantage. If you are given an inch, make it a mile before anyone can stop you. That killer instinct is what separates winners and losers.
Also, imagine the consequences of not crushing your enemy. Namely, that you might end up on the receiving end of Law #15.
Thankfully, NVIDIA is making the best of its luck. It is doubling down on emerging technologies, building specialized GPUs for Bitcoin mining, driverless cars, and the IoT.
We believe the company’s focus on new opportunities will bear fruit in the next two to three quarters, driving the NVDA stock price to $200.00 and beyond.
NVDA Stock Breaking Record Highs
In almost every “gold rush” of our time, NVIDIA is the company selling picks and shovels.
You must have seen this metaphor hundreds of times before. Often times, a writer will (mis)use it for the sake of profundity, but it is perfectly suited to this example.
Driverless cars. Artificial intelligence (AI). Bitcoin mining. The Internet of Things. Each one of these items are candidates for Buzzword of the Year, meaning they are a 21st century gold rush.
Everyone wants to cash in on them. Everyone wants to get rich.
Ironically, the person who gets the richest during a gold rush is the one selling picks and shovels. By selling the tools necessary to exploit the gold rush, this person is essentially taking advantage of the madness without having to compete against the hordes of gold-diggers.
NVIDIA is the 21st century “picks and shovels” company.
Need a GPU to run AI algorithms? Or processors for your billion-dollar driverless car program? Or a Bitcoin mining rig to unlock complex mathematical puzzles? NVIDIA is the company you need to contact.
All this is by way of saying that NVIDIA stock is likely to continue the historic run it’s been on since 2015.
Chart courtesy of StockCharts.com
The reason NVIDIA stock keeps shattering record highs is because analysts continually underestimate its potential. But it’s not their fault; almost all analysts have a natural bias towards conservatism (in the apolitical sense of the word). They don’t want to risk being wrong.
This timidness makes them forget that technological growth is exponential, not linear. Which fortunately leads them to undervalue the potential of the NVDA stock price.
I say fortunately because we can exploit their amnesia.
For instance, there was a recent report in The Wall Street Journal that caught my eye. Others may look at it as just another deal, but I think it is especially significant for the NVDA stock price.
Volkswagen AI Deal Lifts Roof Off NVIDIA Stock
Most readers probably shrugged at Volkswagen AG (ADR) (OTCMKTS:VLKAY) buying NVIDIA’s chips to study traffic flows. It is the kind of boring news story that attracts very little attention, but I consider it extremely important. (Source: “Volkswagen to Use Deep Learning to Optimize Traffic Flow,” The Wall Street Journal, June 28, 2017.)
Analyzing traffic flows is key to the future of driverless cars. Volkswagen can carve out a niche in this emerging space by understanding how stop lights, traffic flow, pedestrians, and road construction shape mobility.
It can package these insights and sell them to every other carmaker in the world, not to mention every tech company dabbling in maps and driverless technology.
It is a B2B play, to be sure, but one that completely depends on NVIDIA’s microchips.
Volkswagen can devise the smartest algorithm in the world, but if it doesn’t have NVIDIA’s type of processors, its algorithm is useless. So NVIDIA is essential to its business.
NVIDIA is making these type of deals every day. I cover the company quite closely, so of course I notice, but these deals typically fly under the radar. Most investors aren’t aware that NVIDIA is taking over the microprocessor industry.
After two years of fabulous growth, NVIDIA stock could have stopped for a breather, but it is obeying Law #15: “Crush Your Enemy Totally.” I believe it is going to keep up this expansion effort until it is one of the biggest microchip companies in the world.