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NVIDIA Corporation Stock in 3 Charts

By Chris Neiger – Oct 5, 2016 at 12:11PM

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NVIDIA is expanding into new markets, growing its profit margins, and continues to retain its dominant position in the graphics processing market.

Image source: Getty Images.

NVIDIA's (NVDA -0.53%) stock price has made some serious gains over the past year, climbing 174% as the company continues to dominate the graphics processing unit (GPU) market and expands its prospects in areas including virtual reality. 

Investors should also be pleased with the company's steady increase in gross profit margin. Let's take a closer look at three areas to get a clearer picture of how NVIDIA is doing.

Discrete desktop GPU market share

NVIDIA currently holds a dominant position in the discrete GPU market share for PCs over its rival Advanced Micro Devices (AMD -3.81%). AMD has ticked up just a bit recently, but here's how much further ahead NVIDIA still stands against the competition:

Data source: Jon Peddie Research.  

AMD managed to jump from 22.8% to 29.9% over the past two quarters, but NVIDIA is still the undisputed GPU champ with 70% of the market. 

That position should please investors even more when they factor in how well the company's GPU revenue is growing. Revenue from the GPU segment shot up 24% year over year in fiscal Q2 2017.

Expanding opportunities in virtual reality

If NVIDIA only had a strong position in the GPU market, it would still be a good stock. But the company is even more attractive when you consider its growing possibilities, particularly in the area of virtual reality (VR). 

The company ensured that it would continue leading in the VR space when it unveiled its GTX 1080, 1070, and 1060 graphics cards a few months ago. The cards are specifically designed to power VR-ready notebooks and their performance comes within 10% of their desktop counterparts.

That's important because it means that notebooks are closing the gap on the performance of desktops for VR capacities, and shows just how committed NVIDIA is to bringing about VR-capable devices.

The focus on virtual reality right now, while nearly 99% of computers still aren't VR-capable, could bring big rewards as virtual reality begins to take off. Here's what the augmented reality and virtual reality market growth will look like over the next few years:

Image source: DigiCapital.

NVIDIA has plenty of other irons in the fire, including its driverless car technology, but the company's current GPU market share put it in a perfect position to benefit from the growing VR market. 

NVIDIA CEO Jen-Hsun Huang said on the company's most recent earnings call: "Our strategy of focusing on deep learning, self-driving cars, gaming, and virtual reality where markets -- these are markets where GPU makes a very significant difference is really paying off."

Gross profit margin

NVIDIA said in its fiscal Q2 2017 CFO commentary sheet: "GAAP gross margin for the second quarter was a record 57.9 percent and non-GAAP gross margin was 58.1 percent. These reflect the strength of our GeForce gaming GPUs, the success of our platform approach and strong demand for deep learning."

And here's what the company's gross profit margin looks like over the company's history:

Image source: YCharts. 

You'll notice the gross margin number in the chart is slightly off from what the company reported, but even if we take the lower number from YCharts, the company has improved gross margins from about 40% sometime in 2010 to 57% right now. That's really impressive growth over such a short time, and shows just how well the company is able to focus on earning the most it can from its products.

NVIDIA is continuing to hold on to its dominant position in the GPU market, is expanding into new markets like virtual reality, and at the same time is increasing its gross margin. Investors should be pleased with the company's moves in all these areas, as they show NVIDIA can both grow its current business while increasing profit efficiencies at the same time.

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA. 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.

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