Why Nvidia Is The Best Stock To Buy
Nvidia is one of the best-performing stocks in the market today. It is a leading player in the “AI computing” industry and has been able to harness the power of artificial intelligence for its own growth and benefit its customers. It has also been one of the best-performing stocks in the market over a long period of time. Its share price has increased at an annual compounded rate of 14% over the past five years.
It has been able to grow at such a fast pace over the past few years, but it has also been able to increase its dividend by an impressive 22% per year over the past five years, even though its earnings have grown at a slightly lower rate. And this was during a period when the overall market was being buffeted by several geopolitical and macroeconomic uncertainties.
This article will provide you with everything you need to know about Nvidia and help you decide whether it’s the right time to buy Nvidia stock. We will use real-life examples to help you understand how Nvidia has been able to grow at such a fast pace.
Nvidia Stock Basics
Nvidia is a global semiconductor company that designs GPUs and related technologies for PCs, workstations, servers, mobile devices, and supercomputers. Computer game developers and consumers use Nvidia’s graphics processing units (GPUs) to render images in video games.
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History of Nvidia
Nvidia was founded in 1993 by Jen-Hsun Huang andن Thomas Manna. Before the founding of Nvidia, both of the founders had experience working in the semiconductor industry, and they saw the potential of developing GPUs into a profitable business.
As a result, Huang and Manna knew they had to find a niche market in which they could gain a competitive advantage, so they targeted computer gaming. The company’s first products were designed to power the emerging 3D computer games market.
In 1996, Nvidia released its first GPU, called the “GeForce 256.” This GPU used several patented technologies to deliver a very high level of 3D graphics at a low cost.
The following year, Nvidia released its first 3D gaming console, the Sony PlayStation, which used Nvidia’s technology to power the console’s graphics.
Nvidia was able to get the PlayStation to play computer games, which was a considerable feat. The company’s GPU technology was also used in several other computing devices and systems, including supercomputers, which further established its dominance in the graphics processing unit (GPU) market.
Products and Services
Nvidia’s primary product is GPUs, which are chips designed to process graphics information and deliver it to the computer’s graphics card. GPUs are used by game developers to render images in video games and other uses, such as computer graphics and medical imaging.
Nvidia also produces chips designed to provide computing power for data centers. These “supercomputers” are the world’s most powerful computers, and most of them are powered by GPUs.
GPUs are sold under a variety of brands, including Nvidia and AMD. There are also many other products and services that Nvidia offers, such as:
- Datacenter visual computing – This includes GPU technology in data centers and cloud computing.
- AI computing includes machine learning and training computers to perform complex tasks.
- Automotive – This includes the use of GPU technology in self-driving cars.
- Wall-mounted displays – This includes computer monitors with built-in graphics cards that customers can connect to their computers using an HDMI cable.
Nvidia’s Business Model
Nvidia’s business model is to sell its chips to computer game developers and other customers who use its technology in those applications. The company earns most of its revenue from selling chips to these customers. A minority of the revenue comes from selling GPUs to data center customers and selling chips to consumers who are using them to power their computers.
Targeting these two types of customers is known as “chip differentiation.” In other words, Nvidia’s chips deliver a better level of performance than the competition’s chips. The company invests heavily in developing its own chips and technologies to provide this performance, which can take a long time.
The company also relies on customers buying its chips for some years to justify its investment. This is a risky strategy since a few years could be a long time, and many customers will have switched to a competitor’s technology by then.
Nvidia’s Operating Profit
Nvidia’s operating profit is an excellent indicator of the profitability of its business model. The higher the operating profit, the better the business model is doing.
In the past five years, Nvidia’s operating profit has grown at an annual rate of 30%. The overall market has grown at an annual rate of 7% during that same time. And this was even though the GPU market decreased by 17%.
This illustrates how Nvidia has increased its operating profit despite a challenging market environment. And this was possible because it was able to grow its business at a faster rate.
Nvidia’s Financials
Nvidia’s financial performance is also awe-inspiring. In the past five years, the company has increased its revenue by an impressive 18% per year. Even though the market has only grown by 7% per year, this revenue growth has occurred.
The company has also increased its operating profit by 24% per year, on average, during the same period. This again illustrates how Nvidia has increased its operating profit even when the market has grown more slowly than it has.
And even though this performance has been awe-inspiring, it is even more impressive when you consider that the market has grown less than it has. This illustrates how profitable the company has been while the market has been relatively underperforming.
Nvidia Future Growth Outlook
The most important thing to remember about the future growth outlook of Nvidia is that it is based on the performance of its GPUs. Because of this, it is challenging to predict.
According to some analysts, the GPU market will continue to grow stronger and become the largest computing market segment by 2021.
But according to other analysts, the market will decrease by 18% by 2021. And this is based on the assumption that the market will be dominated by AI-based chips from companies such as Apple, which has announced that it plans to use AI in its products.
So, it’s complicated to predict the future growth of the GPU market. But even if the market does continue to grow stronger and become a more significant portion of the computing market, Nvidia’s share of it will likely continue to grow at an impressive pace.
Bottom Line
Nvidia is a leading player in the “AI computing” industry and has been able to harness the power of artificial intelligence for its own growth and the benefit of its customers. It has also been one of the best-performing stocks in the market over a long time.
And even though the GPU market is growing more slowly than it has in the past, it is still growing, and Nvidia’s share is still growing. This has allowed the company to generate substantial revenue and operating profit growth, even while the overall market has been relatively underperforming.
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