Last Thursday, cloud providers and household tech names got hammered. This caused hundreds of billions of dollars in market value to be wiped out in a single day and pushed the Nasdaq Composite to its worst single-day decline since 2020. Investors reacted to last week’s Fed-rate-hike with a selling spree, pushing down growth-driving sectors like technology and health care.
Despite current market issues, I will continue to remain bullish on Nvidia (NVDA).
Nvidia is a company that specializes in making graphics processing units (GPUs). It is also a pioneer in the field of artificial intelligence. It has been working with AI for over 20 years now and has helped to make it more accessible to everyone.
Nvidia’s GPU technology can help companies who want to use AI but don’t have the resources or expertise to build their own hardware.
In addition, Nvidia is important in the transition to Web 3.0, a term used to describe the future of the internet. It is an important area the economy is investing in and will be powered by companies like Nvidia.
The company is highly profitable and has grown its revenue and free cash flow significantly throughout the last few years. The value of this company should continue to increase quickly. Therefore, the current dip seems may prove to be a good buying opportunity.
New Growth Segments for Nvidia
Nvidia stock is down by a substantial margin in the year thus far. Investors could capitalize on this opportunity, seeing that Nvidia can sustain what it has been doing in the past few years and the uptick in revenue for its gaming division sales.
Nvidia is one of the leading AI companies in the world. The company has been making waves with its impressive growth and product launches. Nvidia’s latest products include Xavier, an AI chip designed to power self-driving cars.
To remain competitive in the increasingly popular and disruptive AI sector, Nvidia has been consistently investing in making its products cheaper. With a shift in focus on the automotive market, opportunities for massive revenue generation will open up.
Gaming is a large segment of Nvidia’s revenue now. The segment has grown substantially to contribute nearly $12.5 billion in sales for Fiscal 2022 (46% of Nvidia’s top line), and investors don’t seem too concerned about the future. There is a huge market of people who would be interested in gaming.
The opportunity in the automotive sector is much larger. In Fiscal 2022, NVDA’s Automotive revenue was only $566 million – just over 2% of its total sales. Additionally, the Automotive business grew just 6% last year, peanuts compared to Nvidia’s Gaming business.
Investors should consider that Nvidia is a well-established company in the gaming industry. It started by selling graphic cards to the high-end personal computers & game consoles decades ago. Nvidia has a tight grip on the graphics-card market and controls about 80% of the market. This likely won’t last forever, but Nvidia’s outlook is strong.
Nvidia: Jumping on the Web 3.0 Train
As we explored in the previous section, Nvidia can exploit the automotive sector to make a lot of money. However, the other area where there are potentially billions for the taking is Web 3.0. It is one of the leading companies in Web 3.0 technologies. One of the proven benefits of Nvidia’s technology is its versatility.
You can use it in many different industries and across all devices to achieve a wide range of improvements. Nvidia’s technology will power the future of Web 3.0 through its chips.
Today, the Web 3.0 market is very difficult to forecast. It is a rapidly growing market that includes many different industries, from advertising to transportation services to education. However, one can understand the sector’s impact by just a few announcements.
Another area of growth for the company is data centers. In 1999, NVIDIA created the graphics processing unit (GPU), a chip that allows for parallel operations. GPUs have been in demand for years, mainly due to handling large amounts of data.
Despite this changing trend, data centers are still heavily investing in central processing units (CPUs). However, forecasts expect GPUs to dominate the market by 2030.
Wall Street’s Take
Turning to Wall Street, NVDA stock has a Strong Buy consensus rating based on 21 Buys and six Hold ratings assigned in the past three months. The average Nvidia price target of $329.05, which implies upside potential of 86.3%.
The Bottom Line on NVDA Stock
NVIDIA just announced that they’re now a three-chip company and now have a greater portfolio of products. As both processors become more common, demand will increase for NVIDIA products as the company becomes the go-to GPU choice.
Management has had significant success lately and made many important decisions that have impacted the business’ future. The company is set on continuing its profitable trend and growing it even more. NVDA stock can potentially fit into many investors’ portfolios.
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