Since the beginning of May, investors have been tossing semiconductor stocks out the window. The Philadelphia Semiconductor Index has fallen by more than 20%, but some individual chip stocks have fallen much more sharply -- even those that appear to have great long-term prospects. Motley Fool Stock Advisor recommendation NVIDIA
NVIDIA makes graphics chips for computers, gaming consoles, and handheld devices. Delays in the Sony
We know that both the PS3 and Windows Vista will eventually be launched, and both should benefit NVIDIA. Vista, for example, includes lots of neat video enhancements that even many one-year-old PCs won't be able to handle -- unless the owner spends a few bucks to plug in a new graphics card.
Furthermore, NVIDIA is pursuing the mobile market with some success. For example, Motorola's
Another growth driver is high-definition video. Both the HD-DVD and Blu-ray flavors of high-def home video will drive video processing requirements to new heights. This means that if you want to watch a high-definition video on your computer, or on a television connected to a Media Center PC, you'll need a much more powerful video card compared to that required for an ordinary DVD. A measure of NVIDIA's competitiveness in this market was evident during the last quarterly conference call, when management stated that it has, to its knowledge, won every significant OEM design for HD-DVD and Blu-ray.
I can't claim to know what the share price will do over the short term, but I think that the long-term outlook still looks very promising, even though the price is a heck of a lot lower now. I also know that this company has nearly $1 billion in cash on the balance sheet with no debt, which means that it has the financial strength to withstand a downturn. Investors seeking to take advantage of the recent semiconductor malaise may want to consider NVIDIA.
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Fool contributor Dan Bloom has no financial interest in any stock mentioned in this article.