Why NVIDIA Stock Will Continue To Outperform The Market

  • NVIDIA stock has soared 146 percent in the past year, outperforming all other tech stocks.
  • The company continues to deliver outstanding GPU products, as shown by the announcement of three new GPUs for VR-ready laptops.
  • NVIDIA is also becoming a leading supplier of hardware for AI, ML, cloud computing and the IoT, and autonomous driving.

The stock of NVIDIA (NSDQ:NVDA), a leading provider of computer graphic accelerators and electronic components for connected cars and data centers, has surged by more than 160 percent in the past year, as CNBC reported. No other tech stock has gained more than 50 percent in the same period.
NVDA stock chart

Source: Nvidia Stock Price Chart by amigobulls.com

NVIDIA stock has done amazingly well because the company supplies critical components to many high-growth industries and is betting on powerful trends in high-performance pervasive computing, as covered in many previous Amigobulls articles. The trend can be expected to continue because NVIDIA is positioning itself as the leading supplier of picks and shovels for the coming gold rush toward embedded Artificial Intelligence (AI) computing. NVIDIA's products are powering innovation in some of the world's fastest growing industries, including cloud computing and the Internet of Things (IoT), big data, autonomous driving, and Machine Learning (ML). The company is also selling its technology into data centers, which are rapidly moving towards AI and ML.

"Strong demand for our new Pascal-generation GPUs and surging interest in deep learning drove record results," said NVIDAI co-founder and CEO Jen-Hsun Huang. "Our strategy to focus on creating the future where graphics, computer vision and artificial intelligence converge is fueling growth across our specialized platforms - Gaming, Pro Visualization, Datacenter and Automotive."

The executive added that the company is more excited than ever about the impact of deep learning and AI, which will touch every industry and market. "We have made significant investments over the past five years to evolve our entire GPU computing stack for deep learning," continued Jen-Hsun Huang. "Now, we are well positioned to partner with researchers and developers all over the world to democratize this powerful technology and invent its future."

In fact, Huang hand-delivered the world's first AI supercomputer in a box - NVIDIA DGX-1 - to OpenAI, a non-profit AI research company backed, among others, by Facebook early investor Peter Thiel and Tesla Motors founder Elon Musk, focused on developing AI technology to benefit humanity as a whole, unconstrained by a need to generate financial return.

"The DGX-1 is a huge advance," said OpenAI Research Scientist Ilya Sutskever. "It will allow us to explore problems that were completely unexplored before, and it will allow us to achieve levels of performance that weren’t achievable." OpenAI CTO Greg Brockman added that AI has the potential to be the most positive technology that humans have ever created.

But NVIDIA's emphasis on innovative technology development is accompanied by sound business strategy and smooth execution - the company reported second quarter revenue of $1.43 billion, up 24 percent from $1.15 billion a year earlier, and up 9 percent from $1.30 billion in the previous quarter.

In November Amigobulls covered the launch of the first embedded computer designed for AI applications, a credit-card sized supercomputer for embedded autonomous devices and the IoT.

In January, at CES 2016, NVIDIA unveiled the world's most powerful engine for in-vehicle Artificial Intelligence (AI) for autonomous cars. The NVIDIA DRIVE PX 2, with ten times the processing power of the previous-generation unit announced at CES 2015, and able to process 24 trillion operations per second, could enable cars to sense the world around them and drive themselves. "Drivers deal with an infinitely complex world," said Huang. "Modern artificial intelligence and GPU breakthroughs enable us to finally tackle the daunting challenges of self-driving cars." NVIDIA announced a first deal with Volvo and has been talking to other car makers since January to establish itself as the leading supplier of embedded AI technology for self-driving cars - a market expected to explode in the next decade.

In June, NVIDIA announced a new family of products that leverage the company's successful Graphic Processing Unit (GPU) product line to address the high-growth AI and High-Performance Computing (HPC) markets. NVIDIA's GPUs are now replacing conventional Central Processing Units (CPUs) in HPC data centers - such as the data centers operated by Alphabet Inc-A (NSDQ:GOOGL) and Facebook (NSDQ:FB) - and embedded smart hardware for the IoT and self-driving cars. The similarities between GPUs and HPC/AI accelerators, both of which rely on intensive parallelization - running many elementary operations at the same time - indicate that the new targets are a natural evolution of the company's traditional business.

However, NVIDIA isn't forgetting its traditional business. That would be a strategic mistake because tomorrow's products need today's cash to be developed. Virtual Reality (VR) is a natural extension of computer gaming and requires next-generation GPUs. After the launch of its Oculus Rift VR headset, Facebook invited consumers to purchase Oculus Ready PC and Rift bundles with desktop computers from Asus, Dell, and Alienware, because laptop computer GPUs weren't powerful enough to run demanding VR applications. Now, NVIDIA is launching three new notebook GPUs - the GeForce GTX 1080, GeForce GTX 1070, and GeForce GTX 1060 - based on the company's Pascal architecture, which are expected to bring the full power of VR to consumers and developers with laptops.

It appears that NVIDIA is pursuing a solid, integrated strategy with a balanced focus on both the successful products of today and the high-potential products of tomorrow. Investors should feel confident that NVIDIA stock will continue to be a winner and perform above market.

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