NVIDIA is one of the leading GPU and chip makers for gaming systems, mobile computing, and the automotive market, but is it a good to stock to invest in?
This article breaks down what the company is and if it is a good stock to invest in.
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Does 5000% growth sound like a good investment? Hang on, because it’s not all good news with NVIDIA stock.
NVIDIA found itself in the news with a rare four-to-one stock split and some regulatory pushback. But you should still buy NVIDIA stock. Here’s why.
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Every tech investor and gamer on the planet has heard of NVIDIA. The company supplies high-powered graphics components and networking hardware to the computer industry.
NVIDIA GeForce GPUs are in 15% of the world’s PCs as of 2021. They’re one of the biggest names in gaming and video editing. NVIDIA is also common in AI and autonomous driving development.
The company got its start in 1993, so they’ve been around as long as modern computers. NVIDIA’s headquarters are in Santa Clara, CA.
One of the great things about NVIDIA is that its founder is still CEO today. Mr. Jen-Hsun Huang has led the company with a steady hand for 30 years. He’s backed by an experienced executive team, such as executive VP Colette Kress and Sr. VP of Research Professor William Dally.
- 5000% stock price increase in the past decade
- Record profits in the first quarter of 2021
- Strategic partnerships
- Investment in AI, 5G, cloud data, and cryptocurrency
- Strategic partnership with Valve gives them an edge in cloud gaming
- Excellent long-term forecast
NVIDIA has seen a 5000% share price increase in only 10 years, making them one of the most impressive stocks in the tech world. Then COVID hit and the world locked down, driving up demand for computers with powerful GPUs.
NVIDIA grew by 84 percent in 2021. They totaled $5.66 billion in revenues in their first fiscal quarter of the year. Nearly half of that growth has been driven by their gaming segment, the third consecutive quarter of solid growth in only one division.
It makes sense that NVIDIA broke into the cloud gaming market with innovative game streaming technology called GeForce NOW, considering NVIDIA is strong in the $179 billion global gaming industry.
Until now, Microsoft’s xCloud and Google’s Stadia cloud gaming services were the big dogs on the block. NVIDIA rolled out GeForce Now, offering a third alternative. They partnered with Valve, who owns the Steam gaming platform, to give them a significant edge.
Steam is the most used game store in the world. With GeForce Now, gamers can play their Steam games on any browser with only an internet connection. It’s a game-changer in the industry.
They’ve also recently partnered with Google to develop cloud AI, a strategic partnership that is sure to pay off.
NVIDIA released its own ARM-based laptops and crypto-mining servers. NVIDIA’s interest in crypto has helped fuel its spectacular growth. This segment is expected to hit $155 million in the first quarter of 2022.
The remainder of NVIDIAs 2021 revenues came from AI and 3D software, visualization apps, and the NVIDIA Data Center, which partners with Google Cloud.
- NVIDIA acquired ARM Holdings in September 2020
- The acquisition triggered regulatory investigations in several countries
- China’s regulators have caused special concern
- NVIDIA performed a four-to-one stock split in July 2021
- The split devalued individual stocks
- The split also scared long-term investors
You’re probably wondering “What’s the catch?” After all, if NVIDIA is such a strong stock buy, why isn’t every investor flocking to them? There are a couple of reasons you might want to hold off buying NVIDIA.
It all started in September 2020 when NVIDIA acquired ARM Holdings from SoftBank. ARM builds powerful SOC (system-on-a-chip) processors that power devices like iPhones and MacBooks, Playstation, Nintendo DS, and Samsung phones.
ARM considers itself the “Swiss Army Knife of semiconductors” because it powers everything. The purchase deal with NVIDIA sent shockwaves through the computer industry, and immediately drew the ire of regulators.
ARM is a British company, and ownership of British firms by foreign interests immediately triggers a regulatory review in the UK. It was only recently that Japan-based conglomerate SoftBank purchased ARM. Now they’re undergoing a second review.
The US government is looking at the acquisition as a potential antitrust case. After all, if one of the biggest GPU-makers owns one of the biggest CPU-makers, a lot of smaller companies face extinction.
Then there’s the question of China, where regulators are also taking notice. The Chinese reaction seems to be partially motivated by politics, but both NVIDIA and ARM do good business in mainland China. Any roadblocks there could severely hurt sales.
The ARM deal was supposed to be wrapped up by March. Instead, it’s dragging on due to these regulatory issues.
The biggest case against NVIDIA is the four-to-one stock split that just happened in July. The stock was a blowout buy when the fiscal quarter ended, topping $835. Then it settled on $751 when NVIDIA announced the split.
That doesn’t mean that you’ll own less stock. If you have $10,000 in NVIDIA stock, you’ll still have $10,000. You’ll just have more stock than you did before.
The split is a good move as it attracts more first-time buyers who might have shied away from the high stock price. However, current holders panicked when the news was announced.
Nevertheless, NVIDIA has a bright future. Once the regulatory hurdles of their ARM acquisition clear, there’s no saying how high they’ll go.
With all that said, should you buy NVIDIA? The answer is yes. The future looks bright for NVIDIA even despite their issues with regulators over their ARM Holdings deal.
Those regulators could stop the ARM deal, but that shouldn’t hurt NVIDIA’s bottom line. With China in play, NVIDIA may just decide to dump the deal themselves.
All in all, you shouldn’t worry about the stock split. It doesn’t change NVIDIA’s valuation or their spectacular year-over-year revenues growth. Long-term it will help the company attract more investors, and it makes it easier for current investors to sell stock.
Overall the company is in great hands. It has an experienced executive team that has been making all the right decisions. NVIDIA’s gaming segment continues to boom.
Their move to cloud gaming directly takes on Google and Microsoft, who dominate that sector. Finally, NVIDIA’s partnership with Valve gives them an edge.
Go ahead and buy NVIDIA. It’s a great investment with no sign of slowing down.
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I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.