Here's Why You Should Buy NVIDIA Corporation

After a terrific first-quarter performance, NVIDIA can get even better.

May 20, 2014 at 11:05AM

Notebook and PC gaming has grown at an astonishing annual rate of 51% in the past three years. This has helped chipmaker NVIDIA (NASDAQ:NVDA) increase its revenue and earnings at a decent clip. Since NVIDIA specializes in graphics processing units. or GPUs, the company's performance has been outstanding and the recently reported first quarter was no different. However, will NVIDIA be able to sustain the momentum in the face of competition from AMD (NASDAQ:AMD)? Let's take a look.

Robust results point toward a bright future
NVIDIA posted solid results. Revenue increased 16%, year over year, to $1.1 billion, and non-GAAP earnings increased 61% to $0.29 per share. The robust performance of Tesla, Quadro GRID, and Tegra graphics have helped the company perform well despite weakness in the PC market. Going forward, NVIDIA expects significant growth in its graphics segment, as gamers continue to buy high-end GPUs to play the latest PC games.

As a result, NVIDIA expects a strong performance from its newest flagship GPU, the GeForce GTX Titan Z, scheduled to be launched in the current quarter. The company expects this product to gratify both PC enthusiasts and CUDA developers, since it is the best-performing graphics card that NVIDIA has ever designed.

The chipmaker is also expanding its addressable market by targeting the mobile segment. By providing its graphics solutions for a wider range of applications, including cars and data centers, NVIDIA looks well-positioned for the long run.

A strong GPU market and product innovation to drive growth
The chipmaker is counting heavily on its GTX 750 series graphics card that targets entry-level gamers. NVIDIA is seeing strong demand for GTX 750, and the company is also busy promoting its graphics chips aggressively. The chipmaker is also organizing various marketing initiatives such as its GPU Technology Conference to promote its GPU business.

Being the leading player in GPUs, NVIDIA's GPU Technology Conference is a gauge of the popularity of these chips. According to the company, this year's conference was the most successful in its history. More than 3,500 guests attended the conference and nearly 550 talks were held. Both of those numbers were up by 25% versus last year's conference. Moreover, about 1,000 articles on the event were published in the press, and NVIDIA's blog recorded more than 305,000 views. This shows that the market for graphic chips is still strong, and NVIDIA is going all out to make the most of it.

NVIDIA has also launched a new family of notebook gaming GPUs based on the Maxwell architecture. Its new products are expected to enhance performance and battery life in a thin form-factor. NVIDIA has started shipping these products to every major original equipment manufacturer in the current quarter. In addition, the company is expecting to gain market share in the workstation business after another quarter of solid growth.

All these moves should enable NVIDIA to fight competition from AMD, its arch rival in the GPU business. AMD's graphics business has gained some momentum of late, with the company gaining a spot in Apple's Mac Pro. The device uses two of AMD's FirePro GPUs, and going forward, the company is expanding its suite of solutions with the new flagship FirePro W9100. This new chip is expected to address the needs of people requiring 4K resolutions and higher.

NVIDIA needs to continue its product development aggressively to stay ahead of AMD.

GRID growth continues
The availability of NVIDIA GRID in more than 50 server platforms should lead to an increase in revenue going forward. NVIDIA's GRID trials have grown nearly 35% since last quarter to nearly 600 worldwide. In addition, the company witnessed a 200% year-over-year increase in GRID boards. NVIDIA is aggressively converting GRID trials into significant pilot projects, with many of them being in big blue-chip and government accounts.

Apart from this, GRID's vGPU will provide the full benefit of NVIDIA hardware-accelerated graphics for virtualized solutions to customers. This technology is expected to deliver excellent graphics performance for virtual desktops, equivalent to local PCs when sharing a GPU among multiple users. NVIDIA says that the GRID vGPU is the industry's most advanced technology for sharing true GPU hardware acceleration between multiple virtual desktops, without compromising the graphics experience.

The bottom line
NVIDIA's product development looks strong along with the prospects in the GPU market. At a trailing P/E of only 21, NVIDIA looks like a good buy, since its earnings are growing at a terrific pace. The company has a good dividend yield of 1.90%, which can increase in the future as the payout ratio is only 37%. NVIDA looks like a good investment for the long run.

Apple has the biggest thing to come out of Silicon Valley in years, but this little-known chipmaker is the best way to play it
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

Mukesh Baghel has no position in any stocks mentioned. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information