In this video, I will be talking about NVIDIA (NVDA 2.13%) and why I believe it will become the next trillion-dollar company, and potentially one of the world's biggest and most important companies. The stock is up 40% year to date compared to its peers Intel (up 15%), which has been lagging behind in recent years, and AMD (down 9%), which has enjoyed hypergrowth in recent years. It's safe to say that NVIDIA isn't feeling the heat despite the global chip shortage concerns.
The business
NVIDIA reported Q1 revenue of $5.66 billion, up 84% year over year, while its diluted earnings per share climbed to a record $3.03, up 106%. Its core business is split into four segments: gaming, data centers, professional visualization, and automotive. The gaming segment makes up most of the company's revenue, with 47%. The data centers segment makes up 40% and is growing at a five-year compound annual rate of 82%. Professional visualization and automotive make up 6% and 3%, respectively. It's safe to say that all four segments will continue to grow as we make the transition to a completely digital world.
ARM acquisition
Back in September of 2020, NVIDIA announced that it will acquire Arm for $40 billion. But since then the potential deal has received a large amount of backlash from the semiconductor industry because Arm has long been a neutral player, licensing key intellectual property to customers who are otherwise rivals, such as Apple (AAPL 1.45%) and Qualcomm (QCOM 2.63%).
If the deal goes through, it will turn NVIDIA into one of the most important companies of the future. To put this into perspective, last year Arm (licensees) sold 22 billion chips and NVIDIA sold 100 million chips. NVIDIA's CEO Jensen Huang said:
We are buying Arm because we want to advance computing further. The future of computing is going to move further from the cloud to the edge. That is what Arm is fantastic at. Where we are fantastic is AI. So, imagine the possibilities in putting AI at the edge.
NVIDIA has until March 2022 to complete the deal and it has recently been reported that Qualcomm offered to invest in Arm if regulators block the $40 billion acquisition.
Cryptocurrency metaverse
NVIDIA is no stranger to the cryptocurrency world. According to Huang, we are moving toward a crypto metaverse. In February, NVIDIA released a graphics card for Ethereum miners called The NVIDIA CMP (Cryptocurrency Mining Processor). At the end of May, NVIDIA had made $155 million from its CMP cards. With NFTs gaining in popularity and VR becoming mainstream, there's no reason the cryptocurrency side of NVIDIA can't continue to grow.
Watch the video below for the full insights.
*Stock prices used were the closing prices of June 17, 2021. The video was published on June 18, 2021.
