Don’t Sleep on Nvidia ($NVDA)

People who own Nvidia stock are a happy bunch. The technology stock company continues to soar upward, height on height, with no end in sight. But, because we don’t see stocks like this everyday, and because the average investor has a sketchy notion at best about what Nvidia even does, people are missing opportunities on this one.

Unless something jarring happens to Nvidia or the larger market, you’re not going to get a great deal on $NVDA anytime soon. But if this company makes good on even half of its potential growth in AI, cloud computing, self-driving cars, genre-leading chip revenue, and their many other growing involvements, the stock is going to rise by leaps and bounds, even at its present valuation.

$NVDA I think there will be a correction soon to teck stocks and this one. It will go down. I’ll buy again but it will reach 280 by Q4

— Hassan Shoucair (@shuks28) Jul. 21 at 11:46 AM

The Valuation and the Financials

This is the point where critics typically interject. At present, yes, the company is trading at 45X earnings. Forward P/E is 47.91. I understand why an outsider might be skeptical. $3.50 earnings per share is admittedly a small reward after hearing all the hype surrounding this company.

On the other hand, Nvidia’s price expansion is mostly due to the headway they are making in a variety of industries. Their chips, IP, and various technologies are going to power everything from smart devices, to next generation touchscreens, to smart cars, to cloud computing, and beyond. If you can’t see the upside here, you have to be truly pessimistic. Here are how some of these upcoming partnerships could affect the stock.

Nvidia’s Immediate Future

Nvidia just made a new partnership with Audi. To quote the press release:

“The A8 is packed with NVIDIA powered systems, including revolutionary new user interfaces, a new infotainment system, a new virtual cockpit, and new rear seat entertainment options. …..the A8 features the newest NVIDIA powered MIB+ infotainment system. Its two touch screens, second-generation virtual cockpit and the new rear seat system with Audi tablets and display controller all feature NVIDIA technology.”

Nvidia is doing similar work for Toyota on a fleet of vehicles that will be unveiled over the coming years. We don’t know as much about the extent to which Nvidia will power these systems, but as the company really seems to be leading in most aspects over competitors like AMD, we have to think it will be significant.

What about their accelerating role in Microsoft’s cloud computing? What about their upcoming extensive partnership with Baidu? What about their potential for AI, the future of video games, and on and on. The future goes to the companies with the best technology, the best ideas, and the best ability to create inroads with innovators past, present, and future.

$NVDA isn’t cheap. If you already have it, I wouldn’t sell it for anything. I would imagine that anyone who buys now wouldn’t regret it, at least in the medium to long term. If you buy and hold, I doubt you’ll be disappointed with Nvidia, especially as hype grows along with actual accomplishments.