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Why NVIDIA Can Thrive Through a Downturn

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Slower economic growth shouldn't stall this business.

NVIDIA (NVDA 2.84%) stock has been on a tear over the recent economic-growth upturn. But can the semiconductor chip giant still win if growth slows?

In this video from "The Five" from Motley Fool Live, recorded on Oct. 12, Fool contributors Jose Najarro and Brian Withers discuss the assets that should help NVIDIA continue growing even if economic conditions worsen.

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Brian Withers: All right, Jose, what stock do you have regardless of economic conditions in the next year or two that you like?

Jose Najarro: The company I'm going to talk about is probably my favorite company right now and that is NVIDIA, ticker NVDA. Even though, let's say, growth does slow down, I don't think tech innovation is going to slow down, and NVIDIA is a huge, huge player in tech innovation.

NVIDIA for those not familiar, they create graphics processing units, and that's used in pretty much everything from gaming, data center, autonomous driving. They are also providing other SaaS [software as a service] solutions as well. But like I mentioned, even if we see some slowdown in growth in the most recent quarter, NVIDIA made revenue of about $6.5 billion.

The two main segments that NVIDIA makes revenue from is it's gaming, which makes up about $3 billion of that $6.5 [billion] and that is usually the biggest segment. And that's usually consumer-driven.

These are your laptops that you go out and purchase, your high-performance PC, if you're working on some workstation for animation, studio development, that's where that comes from. Then the other major form of its revenue is still data centers. Data centers continue as clouding products continue to appear and e-commerce, fintech, everything continues to grow, data centers need more processing power.

This makes about $2.3 billion out of that $6.5 [billion]. It makes a good portion. NVIDIA, I feel even if growth slows down, they still have plenty of options of where to make money. Another thing is they are focusing in providing SaaS solutions and things like cybersecurity, healthcare, autonomous driving.

These are all markets. Cybersecurity I think is one of the biggest markets that I feel like, during the summer, every other week we heard about a big retail somebody getting hit with some form of cyberattack.

Things like cybersecurity, healthcare, and the autonomous driving, stats solutions. NVIDIA also hits with some of the software they have. For me, it would be NVIDIA, one for the next year or two. Maybe in the next 5, 10 years to hold. That's the one I'm super excited about.

Withers: Yeah, definitely I don't see growth in the cloud slowing down. It's amazing how NVIDIA went from being really just a video-chip company to really owning the GPU market. It's just really impressive over the last five years the strides they've made to get into the data center.

I think they're really smart about the way they're going about it.

Jose Najarro owns shares of Nvidia. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.

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