Value stock: Nvidia Corp.
Nvidia is one of the largest technology companies worldwide with a market capitalization of 318 billion dollars as of September 2020.
Whenever a tech guy hears the word GPU (Graphics processing unit), Nvidia immediately comes to mind. Recently this large tech player had started expanding into a wider specter of areas like self-driving cars, artificial intelligence, data visualization and data centers.
The company is widely known by gamers, software and hardware engineers, IT people. Nvidia has some innovative stuff in its pockets. Let’s jump in.
The company was founded in 1993 by three computer geeks who saw the future of computing filled with stunning graphics and strong processors.
The company was started already having some decent funds, compared to other successful startups. The starting budget was 40,000 dollars, that’s 71,000 dollars in today’s money. Nvidia is well-known for inventing the first graphics processor chip, which is very impressive.
What exactly are these GPU’s?
It is not that difficult to get what they are, it’s just that the technical side is quite complex.
To put it simply, GPU is a processor that we buy for our computers which accelerates and drastically improves graphics of the images and video that we experience. GPU’s do that by interacting with the memory of a computer and speeding the inner processes up.
Gamers especially appreciate this because of the better player experience they have with GPU’s. Also, GPU’s are really helpful in the data visualization industry.
An incredibly large number of these processors are already inside our computers when we buy them. It’s just that for certain, more advanced tasks, computers need some additional help, some “carbohydrates” to make these tasks more doable for it.
Throughout the years, Nvidia, seeing what these processors can do and having a large vision of implementing them more widely, they started getting into other industries such as automotive, professional visualization, artificial intelligence and even quantum computing.
Nvidia has the largest market share for GPU’s of 75%, that’s nearly 5 times higher than the piece Advanced Micro Devices has. In the gaming market, comparing the volume of users, Nvidia has more like 90% and AMD has only 5% share of the market.
Although Advanced Micro Devices are growing and innovating rapidly, NVDA seems to never give up and remains the head of the tech family globally. The company had introduced the term GPU itself by the way when it was starting out in the early 90s.
It cannot be forgotten that Nvidia is now preparing to acquire ARM, one of the largest and most influential semiconductor and company in the world from SoftBank.
For more than 40 billion dollars.
When the company completes this acquisition, our guess is that it will become completely unstoppable. Nvidia is the queen in GPU’s and ARM is the king of CPU’s (Central processing units of a computer).
SoftBank is one of our favorite investment banks which aggressively invests in disrupting startups and is building the largest ($100 billion) fund on the planet.
To let you understand how important this ARM deal will be, it has to be said that ARM’s technology is almost definitely inside the device from which you are reading this. ARM claims that it had shipped more than 180 billion computer chips around the world.
If it all goes well in terms of the US-China trade war and regulatory approvals, Nvidia acquiring ARM would connect two insanely large and powerful conglomerates and probably no company could compete anymore.
Well, of course, we cannot be too sure about that, many giants have fallen in the past.
It’s just that Nvidia is a massive innovator filled with geniuses, doing things like quantum and cloud computing, visualization and graphics better than most companies out there.
ARM, on the other hand, has been using the same business model for years that has been working perfectly till this day. And Nvidia claims that it will let ARM keep it’s brilliant and simple business model after the acquisition.
A sea of investors, just like us are waiting for the deal escalation and to see how it all turns out. The current trade war is definitely a bummer to come by.
The popularity of the stock is going through the roof. Say, one looks it up on YouTube and is immediately presented with dozens of positive videos, giving away insane predictions and hopes for the stock.
The main product of the corporation, GeForce, empowers people, especially tech enthusiasts. Having a GeForce for these enthusiasts is somewhat similar to having an Apple Iphone for regular people. There is so much authority, trust and obsessiveness in their products and no one would exchange them to anything else.
The brand of this corporation also, without a doubt had been injected in our subconscious minds. Most of us are welcomed by Nvidia, as well as Intel logos when we open up our laptops or sit down in front of our desktop computers.
Another one of the reasons why this company has such large following is because many users and computer enthusiasts had fallen in love with its CEO back when it was starting out. And that man is still the CEO of the company, successfully controlling it and has a large amount of respect from the users, gamers, investors and computer geeks.
Millions of gamers worldwide obsess over GeForce and look for ways of getting their hands on the latest thing by Nvidia. The investor’s hype is also really similar to this, everyone had seen what returns can buying the stock give so automatically there are lots of expectations for the future.
It should be said that the liquidity, the trading volume is quite high, that makes it a brilliant stock for short-term investors to play with and long-term dogs to be comfortable investing, knowing that during the time of a meaningful event, stock will go up fast and stay up.
The average (3 month) trading volume of the stock is around 13 million shares traded daily. In terms of the earnings, the company is known to keep them without too much investments. Maybe it’s piling up cash for the ARM deal? No one can say.
The stock had a bit of a hard time during the events of 2018, but after that it seems to be a total heartbreaker for the shortsellers. Since 2018, meaning, in 2 years as of now, Nvidia stock has grown 23,000%. And it is still hyped, really popular by both younger and older investors.
What happened in 2018 that hurt Nvidia so badly? The company had crashed by more than 31% during that year and 2019 as well.
First of all, there has been a strong market sell-off in October, affecting technology stocks largely.
Another major factor why especially Nvidia suffered was because of the emerging US-China trade war. GeForce RTX processor’s beta testing was doing really badly and the users had turned against the product. These are the main strong reasons why it had suffered harshly.
However, now, investors are more than happy.
One of the things often discussed is the battle between the three giants: Nvidia, Advanced Micro Devices and Intel. Many products all of these companies build are almost identical. It is only a question of how they market it.
Nvidia is widely known for it’s unbeatable marketing tactics. Edward Bernays, one of the people who started the first acts of public relations and propaganda, “Father of public relations” had helped many companies, this one as well. They controlled the masses.
Sigmund Freud was Bernays’ uncle. Edward from his very youth had gotten himself into the subconscious mind work of his uncle. With all these incredible uncle’s studies and analysis, Edward Bernays let companies sell their products to even those people who didn’t really need them.
Now back to Nvidia. The company has really great products, but they are still overpriced. But that’s just the ethics of the company. In 2018, AMD started being seen as a very competent and largely growing competitor.
Recently AMD started concentrating on the consumer market more than ever before which may or may not lead to jump from 10% of market share to 30%. If that happened, AMD would have quite a bit of that computer chip pie and would become even a stronger competitor.
But, knowing that Nvidia is also expanding to new waters and having more and more industries under it’s lead, the company should not let us down anymore. Intel will not be a threat to any of these companies because of empty promises and mainly, it’s actually getting off GPU’s.
To conclude we would like to say that Nvidia is the complete global leader in the semiconductors and especially Graphic processing units (GPU’s).
With so much potential from buying ARM, capitalizing on the artificial intelligence and robotics market and gaining more and more popularity in the stock market, this green hornet founded in the 90s could be living and thriving till the end of time.
Today, more sales than ever are generated on a daily basis when most techies are staying at home, playing video games.
However, there is still much for Nvidia to work on. It would be very unfortunate if the US-China trade war could get in-between and even stop the ARM deal.
As mentioned earlier, this deal would drastically change the infrastructure of the computer chip and semiconductor industry, since Nvidia and ARM both are undefeated world champions there.
Therefore, if the ARM deal will be successful and it wouldn’t hurt manufacturing, the company could possibly become something close to a monopoly. Hopefully, an extremely innovative one.
We should appreciate the inventions and work of Nvidia. Without these great GPU’s we would be having hard time playing, drawing, creating, analyzing and doing even more on our devices.