Nvidia (NVDA -0.74%) has done a great job in returning capital to shareholders in terms of both dividends and share buybacks. But, will this well-liked company see stock appreciation? In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on March 30, Motley Fool contributors Toby Bordelon and Rachel Warren discuss where there's still growth and opportunity ahead for Nvidia.
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Toby Bordelon: One thing they're looking at is artificial intelligence. If you follow Nvidia, I'm sure you're very aware of that. They see a big opportunity here and, just in the lower right-hand corner, you can see the size of the industries they're looking at for large opportunities in AI. They really see a lot of potential here. One of the ones they're really focusing on is the automotive industry, autonomous vehicles, self-driving cars, that sort of thing. I want to focus on this just because that's cool. You can see some numbers here about what they are looking at. A billion passenger and commercial vehicles, 8% EV penetration right now. They think that's going to get to 50% by 2035. They see more opportunity there for them. You can see they're already a leader in this space. Their technologies are in 20 out of 30 passenger EVs now, seven out of 10 trucks, and eight out of 10 robo-taxi companies. In terms of data centers out there, they're in all of them. All of the active autonomous vehicle data centers, they are there. They're already a leader, and they expect to see that leadership continue even further. They just announced an $11 billion pipeline with some partners. You see here a bunch of automakers and some other companies working in the auto industry. They're a huge presence. This is just one piece of what they are doing. What have they done? It's not just a company with potential. They're delivering results. You can see here from fiscal 2022, a record-breaking year, look at that revenue increase. But what I like most about this chart here, as you see, the operating income and the earnings-per-share increased more than revenue. So they're growing revenue while controlling costs, increasing gross margins and how they're delivering results like this from a commitment to investment. You can see 24% compound annual growth rate in both R&D and CapEx going back to 2010. They just invest. They continue to invest in this business, make smart acquisitions and what does it do for them? Gives us great cash flow. This all leads to great free cash flow for investors, $8 billion in the last fiscal year. Fantastic. Along with share purchase and dividends, this is a great company that's well run and I think there's more to come.
Rachel Warren: I love this company. I mean, I think there's no question. It's a real powerhouse. One question I have, and I think it's talked about fairly frequently, is there a lot of runway left for this company? We know shares are up about 120% over the last year, which blew my mind when I saw that considering the volatility we've been seeing in the market. Do you think investors have seen as much runway as this company is going to deliver in the coming few years? Or do you think that there is a lot of growth yet?
Bordelon: I think there is potential for growth, especially if the areas and the things that we're seeing in artificial intelligence work out. Valuation is certainly a concern. But one thing you've got to remember is, they've done a great job of actually returning capital to shareholders in terms of both dividends and share buybacks. I think you're going to see some stock appreciation even without factoring the growth of the business because they have that massive cash flow, $8 billion last year and growing. They can continue to buy back shares. You're going to get some growth from that. You can think of that as the company reinvesting in the business for you, if you want to think about it that way. But, growth is going to continue. I think there's a lot of opportunity. I would not get scared off on this one, but know that you're probably going to see some short-term drops in the mid changes because it is a fairly rich valuation.