After hitting its all-time high late last year, Nvidia (NVDA 0.95%) stock has since lost a third of its value. But the semiconductor giant still has the potential to become a trillion-dollar company -- and much more -- in the years ahead. In this episode of "The Rank" on Motley Fool Live, recorded on April 11, Fool.com contributors Brian Withers, Matt Frankel, and Jason Hall discuss the many tailwinds ahead for the chipmaker.
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Jason Hall: If you're a gamer, if you've ever been a gamer, you know Nvidia because of their graphics card. If you play PC games, you probably had an Nvidia card because it was the best thing and you got the lowest latency, the highest resolution, fastest refresh speed. If you followed cryptocurrency or been involved in cryptocurrency over the past decade, you know Nvidia because their GPUs have also been really useful for mining. Doing those hard math calculations that are, why GPUs are important for gaming is how you mine more cryptocurrency. The thing is that those businesses are as important as they are for Nvidia, there are much bigger opportunities out there that the company continues to leverage on. You see here under the highlights, data centers, it's made a massive move into data centers over the past five or six years. As we continue to see more things happening in the cloud, that data center business is likely to continue to grow. Software and services are going to be increasingly part of Nvidia as it builds an ecosystem. You think about artificial intelligence, you think about vehicle autonomy. All of those things are areas where Nvidia is quickly becoming a leader. I want to point out, too, that the Arm acquisition. It was trying to buy Arm Holdings from SoftBank, and that deal was blown up by regulators. But I don't think it's really undermined the company's thesis. The idea with Arm Holdings is this is the IP that it uses to build on. This is the platform it uses to design its semiconductors on, but it's also the IP that a large percentage of the rest of the semiconductor companies use. That's why it was blown up. I don't think it undermines the company's potential. I do think, 10 years from now, this is going to be one of the five most valuable companies in the world. Even if you look at the price now and you say this is still an overvalued stock, I think it's one of those companies that, because of the trillion-dollar market that semiconductors are going to be not that many years from now, it's increasing market share and designing the best semiconductors for different applications. It's fabless model, so it leverages like Taiwan Semiconductor to handle the capital-intensive part of the business. I think this is going to be a market beater. It's a high-valued stock that always will be because it's going to continue to perform. Brian?
Brian Withers: Yeah. When Stock Advisor bought Nvidia in the early days, it was a video card company. It was stellar at it. What I've been impressed with, and data center revenue will soon surpass its video card revenue, is they said, hey, we can get into this data center space with the smarts that we have and just really executed on it, and that's just a multibillion-dollar business today. One thing I can predict 20 years from now with much certainty is there's going to be more computing power needed to power more applications and more things in our lives. I mean, look at EVs, look at autonomous driving, these phones that we carry around. We won't even have to carry phones in the future, but I think they're going to be powered by some kind of Nvidia chip.
Hall: You haven't even touched on the industrial side, where there will be more and more machines with connected devices. Matt, 30 seconds here, and then we'll do some Q&A and a wrap-up.
Matt Frankel: No, I don't have a ton to add. It's rare to find a tech company of that scale that's dominant at what they do. Like Brian said, I think the market is going to grow five, six times in size in the next decade just because all the devices coming online, and you want the company with an 80% market share. [laughs]