NVIDIA Stock Is a 20-Year Buy

Buying based on current deals probably isn’t a good idea, but the trends still favor a multi-decade rally for NVIDIA stock.

Jun 8, 2014 at 4:30PM

Tegra K

The Tegra K1 should get a boost from tablets and other devices we can't even imagine yet. Credit: NVIDIA.

Shares of NVIDIA (NASDAQ:NVDA) stock were up slightly this week on news that its Tegra K1 mobile chip is powering Google's (NASDAQ:GOOGL)(NASDAQ:GOOG) experimental Project Tango tablet. A developer kit priced at $1,024 goes on sale later this year.

There's plenty of hype to support the news. From NVIDIA's blog post describing the news:

Game developers could, for example, use it to paint a 3D virtual battlefield in your living room. Or create large scale virtual and augmented reality experiences. Real estate companies could build interactive, 360-degree "fly through" tours. Interior designers could scan a client's home and test design ideas, such as moving walls or inserting furniture. Retailers can guide the user to specific places or products.

Don't buy the news, buy the trend
Much work is to be done before any of these lofty dreams can be made a reality. First, developers have to pony up a hefty sum for a developer kit. They'd then have to commit the resources to write breakthrough code just for the Tango tablet. Finally, Google would have to set up marketing, manufacturing, and distribution for the new tab. No easy task for a company that's had trouble forecasting and meeting demand for its Nexus devices.

Does that mean you should avoid NVIDIA stock? Hardly. Instead, the Tango news brings into sharp relief two things that make this business interesting:

1. Tegra K1 is far enough ahead of its time that it's being used in experimental devices. While there are plenty of high-powered chips out there, the consensus seems to be that Tegra K1 and its 192 graphics cores perform about as well as any desktop PC processor, but in a mobile device. No wonder Google chose the chip for its Tango experiment.

2. NVIDIA trades like a modest-growth company. Analysts forecast just 7% annualized earnings growth for NVIDIA over the next five years. The stock also trades for less than three times sales and two times enterprise value. All perfectly acceptable figures if Wall Street is right about NVIDIA's growth prospects. Yet I'm not so sure, especially when you consider that trends favor a shift to high-powered mobile devices that will need the sort of horsepower Tegra provides right now.

Add it up, and I think NVIDIA stock is one to buy and hold for the next two decades. Have a bear argument to share? Do you own the stock? Leave your comments in the box below.

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Google's Project Tango tablet proposes to go where no other slate has. Credits: Google, YouTube.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google (A and C class) at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Google (A and C shares) and NVIDIA and owns shares of Google (A and C class). Try any of our Foolish newsletter services free for 30 days. 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.

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.

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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.

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