Nvidia ($NVDA) is a well known chip maker, serving customers such as Apple, Google, and Amazon. Since its founding in 1993, Nvidia has grown to an industry leader in computer graphics and improved their GPU architecture. They originally created chips for gaming and computer graphics purposes, but have since expanded to data center and automotive products. Fundamentally, the chip maker is a big buy despite its $614 price tag, and buying Nvidia stock will have you well prepared for the near future.
Gaming is Taking Over
In the past 10 years, the world of gaming has seen a rise like no other. Esports leagues have grown in rapid numbers, yielding plenty of gamers to turn in profits comparable to professional athletes. Even colleges are beginning to include Esports teams in their varsity sports including notable names such as Boise State and University of Akron. Universities who have invested in these teams have seen incredible returns on their investment. In 2017, the Esports market was valued at $1.5 billion, and is estimated to be at $2.3 billion at the end of 2022.*
A growing industry like gaming is perfect for the makers of these chips. Through the 2020 fiscal year, Nvidia brought in $2.5 billion in gaming revenue alone, a 67% increase from last year. Nvidia will continue to thrive as far as gaming goes, due to their significant market share of gaming chips. Streaming has made specific gamers like Ninja extremely popular, using platforms such as Twitch to allow avid gamer fans to watch him play games and earn revenue through watch time and donations. It sounds simple, but the more people game, the even more people stream, meaning even more chips Nvidia will sell.
An Elite Acquistion
Arm Limited was a company with a couple investment mishaps, but got lucky when Nvidia bought it for $40 billion this past year. Nvidia really showed its strong financial position with this acquisition and its plan for the future. Acquiring Arm will help Nvidia continue its growth in Artificial Intelligence technology as well as computing space. It is no lie that the world is advancing towards these technologies, and Nvidia has only positioned themselves to continue being at the forefront of the technology world.
By expanding their arsenal with Arm, Nvidia continues to punish its competition. Intel ($INTC) had a huge blunder back in the summer of 2020 when Apple decided they would no longer use them for their chips. Intel’s stock has been struggling somewhat since this announcement, as losing Apple is not an easy loss. AMD ($AMD) doesn’t have it as bad as Intel, but is not in any position to make a true run at Nvidia.
The Financials Are Nothing to Sneeze At
As aforementioned, Nvidia, saw a 67% increase in revenue from their gaming industry alone. In addition, they saw a 97% increase in data center revenues, leading to an overall 61% revenue increase in 2020. With revenue increases like this after such a crazy year, Nvidia is proving its dominance in generating sales. In a perfect world, chip usage will only increase, and I think that perfect world is the real world future.
As for stock performance, Nvidia has had quite the 5 year run going from $35 to $614 today. Buying Nvidia stock exactly one year ago would have returned you well over 100% in gains from its $286 mark in April 2020. Performance like this from a strong company in a growing industry should jump off the table at you. I’m no fool, $614 is a high price for 1 share, but a fool would say its not worth it. Innovation makes Nvidia clearly worth it, and it has significant revenue measures to back it up. If your brokerage allows it, get a fractional share of it, whatever you can do to be apart of the best chipmaker in the market.