Even in the face of the pandemic, NVIDIA (NVDA -2.68%) was a clear winner, notching gains of 122% in 2020. The company's graphics processing units (GPUs) were front and center for many of the trends that accelerated last year, giving the company a boost in the process. That added to NVIDIA's already impressive performance, with the stock up more than 3,000% in the past decade.

Given its significant gains, investors might be tempted to believe the low-hanging fruit has already been picked, but nothing could be further from the truth. Many of the trends that have driven NVIDIA's robust growth are just getting started, giving the company a significant market opportunity ahead.

Let's look at three great reasons to buy NVIDIA stock now.

Cloud computing icons over a blurred background.

Image source: Getty Images.

1. Every cloud has an NVIDIA lining

The digital transformation has been ongoing for some time, with cloud computing becoming the rule rather than the exception. The pandemic kicked that trend into overdrive, with more companies adopting cloud computing than ever before.

What does that have to do with NVIDIA? The humble GPU has long been the cornerstone of many cloud computing operations. Parallel processing, or the ability to handle a host of complex mathematical computations simultaneously, has made NVIDIA the processor of choice for the world's most sought-after cloud computing providers. This includes industry leaders Amazon's AWS, Microsoft's Azure Cloud, Alphabet's Google Cloud, International Business Machines' IBM Cloud, and Alibaba Cloud -- and those are just the big dogs. There are legions of smaller players that look to NVIDIA for their cloud processing needs as well.

A circuit board with a chip labeled AI at the center.

Image source: Getty Images.

2. You can't spell NVIDIA without AI

As indispensable as GPUs are in cloud computing, they're equally crucial to the success of artificial intelligence (AI). It turns out that parallel processing, which is key to rendering lifelike images in video games, is also a workhorse when it comes to the unique challenges of AI. Seems like everyone has been trying to crack the code to developing a dedicated AI processor, but the humble GPU is still the go-to for both researchers and data centers wanting to run AI and other sophisticated algorithms.

NVIDIA's data center segment, which includes processors used in cloud computing, AI, and data centers, has become the company's biggest growth engine. Revenue in the segment grew 125% year over year in 2020, and notched a new record in the fourth quarter as the digital transformation gained steam. There's little doubt that the adoption of AI and cloud computing will only grow from here, and NVIDIA is on the pole position to benefit from these trends.

NVIDIA RTX 30 series of processors.

Image source: NVIDIA.

3. I can see the light

With all the focus on forward-looking technology, it's worth mentioning that NVIDIA is still the undisputed leader when it comes to dedicated gaming processors. The company held 82% of the discrete desktop GPU market in the fourth quarter as the hands-down favorite of serious gamers everywhere. 

When it comes to innovation, NVIDIA is miles ahead of the crowd, and the company isn't taking its foot off the gas. Late last year, NVIDIA introduced its latest line of processors that marked a breakthrough in the rendering of light and shadow. Ray tracing recreates the path light takes in the real world in the digital realm. The technology that accomplishes this in real-time has been elusive, with many calling it the holy grail of gaming. NVIDIA cracked the code, releasing a trio of RTX (ray tracing) processors, which have quickly become the gold standard and provide the most cutting-edge visuals on the market.

Gaming still represents roughly half of NVIDIA's total revenue, and the segment grew 67% year over year in the final quarter of 2020. 


NVIDIA Grace CPU. Image source: NVIDIA.

The final tally

Fiscal 2021 (ended Jan. 31, 2021) was a record year for NVIDIA. Revenue of $16.68 billion grew 53% year over year, while earnings per share of $6.90 also climbed 53%. 

The chipmaker isn't resting on its laurels. During the company's investor day earlier this month, it made a number of announcements that foretell a bright future. NVIDIA announced the Grace CPU, which will target the data center market, promising to deliver 10 times the performance of existing CPUs when addressing high-performance workloads and AI. The company also said its line of GPUs designed exclusively for cryptocurrency mining were selling briskly. 

Lastly, even after a record year, BMO Capital Markets analyst Ambrish Srivastava estimates that 85% of NVIDIA customers have yet to upgrade to the company's latest generation of processors, leaving plenty of room for growth.