NVIDIA - Stocks

Instrument description

NVIDIA is an American technology company that is renowned for designing and developing Graphics Processing Units (GPUs). The company also focuses on personal computer (PC) graphics, chipsets, multimedia software, and developing Artificial Intelligence (AI).

NVIDIA is headquartered in Santa Clara, California, and market leader in supplying GPUs for the big gaming industry and also providing SOCs (System on Chips) for mobile computing and automotive sector. NVIDIA is showing its capability in the gaming industry by-products such as Shield Tablet, Shield Portable, and Shield Android TV.

NVIDIA has 40 offices located mostly in the US and also in Asia and Europe. NVIDIA has almost 13,800 employees, and the company is steadily growing due to rapid technological advancements. Since 2014, NVIDIA has diversified its portfolio and now functions in five categories that are gaming, data centers, professional visualization, artificial intelligence, and automotive.

NVIDIA’s most popular and technologically advanced GPU product was the ‘GeForce,’ which revolutionized the graphics in the gaming industry and directly competed with ‘Radeon’ products, which were developed by Advanced Micro Devices (AMD). NVIDIA also competes with Qualcomm and Intel in the mobile chipsets market.

In recent years, NVIDIA is focusing on developing supercomputing sites all across the globe. Seeing the exponential rise of the mobile computing industry, NVIDIA has started to develop and supply mobile phone and tablet processors through its ‘Tegra’ brand. NVIDIA also develops graphic processors of navigation and entertainment devices. Forbes named NVIDIA as ‘Company of the Year for 2007’ for its amazing struggle and success in the previous five years.

History of NVIDIA

NVIDIA was formed on April 5, 1993, by Curtis Priem, Jensen Huang, and Chris Malachowsky. Huang was a microprocessor designer working for AMD and also as a director of CoreWare at LSI Logic before starting NVIDIA. While Malachowsky and Priem worked together as engineers in Sun Microsystems. The initial capital used by NVIDIA at the start was $40,000, but the company received almost $20 million venture capital fund from Sequoia Capital and other companies.

In 1995, NVIDIA launched NV1, which was the first mainstream multimedia processor. In 1997, NVIDIA introduced RIVA-128, which is the first 128-bit Direct 3D processor for high performance.

On January 22, 1999, NVIDIA started to trade publicly at a $1.83 share price. In 2000, tech giant Microsoft asked NVIDIA to provide a high-quality graphics processor for its upcoming gaming console called ‘Xbox.’ Microsoft paid $200 million to NVIDIA in advance. In 2003, NVIDIA launched the iconic GeForce3, which was the world’s first programmable graphics processor.

In 2004, NVIDIA supported Sony in the design and development of the RSX graphics processor for the Play Station 3 game console. NVIDIA continued to diversify its portfolio by making key acquisitions such as acquiring Exluna in July 2002 and MediaQ for $70 million in August 2003. Some of the other notable acquisitions included

• ULI Electronics in December 2005
• Hybrid Graphics in March 2006
• AGEIA Technologies in 2008
• PGI in 2013
• TransGaming in 2015
• Mellanox Technologies in 2019
• SwiftStack and Cumulus Networks in 2020

The stock value of NVIDIA jumped to $23.9 in January 2002 but suddenly dropped to $2.45 in October 2002. The stock value again surged in mid-2004 and then touched $39 in October 2007. NVIDIA’s stock lost nearly 80% of value during the economic recession of 2008, and the share price dropped to as low as $5.9 by the end of November 2008.

NVIDIA’s stock value gained momentum again in mid of 2015 due to the Bitcoin boom. NVIDIA attained market leadership status in the graphics processing market in 2016 and 2017. The stock value of NVIDIA surged to $293 by October 2018. The stock of NVIDIA has been split four times during its business history that is 2 for 1 three times in 2000, 2001, and 2006 while a split of 3 for 2 in 2007.

Current Business and Investment of NVIDIA

NVIDIA has global fame and recognition in designing and producing GPUs, PC graphics, and chipsets. NVIDIA is a leader in graphics processors and media devices. NVIDIA excels in integrating 2D, 3D, broadband connectivity, communications, and high definition audio and video services on multiple platforms, whether it is PCs, Gaming Consoles, workstations, and mobile and Internet-based devices. NVIDIA operates in two segments that are Graphics Processing Unit (GPU) and Tegra Processor.

• GPU division overlooks the products that are designed, developed, and supplied for particular markets such as GeForce for the gaming industry, Grid for cloud-based visual computing users, DGX servers, and workstations for big data researchers and AI data scientists.
• The Tegra unit is focused on integrating the complete computer on a single chip. This division also integrates GPUs and multi-core CPUs to develop supercomputing for mobile gaming, robots, entertainment devices, and cars.

The NVIDIA offerings include GeForce Now Cloud gaming service, NVIDIA Drive AI Car computing platform, and NVIDIA DGX AI supercomputer.

Risk and Potential in NVIDIA Environment

NVIDIA posted revenue of $11.72 billion in 2019, and most of it was a result in massive growth in GPU revenue, which was $4.09 billion. But the company predicted a loss of $10.88 billion in revenue in 2020 due to sluggish sales of PC and notebooks in the Chinese market. NVIDIA, however, expects the revenue to grow $12.21 billion by 2023. The operating income of NVIDIA in 2019 was $3,804 billion, net income was $4,141 billion, and total assets were $13.292 billion

SWOT analysis is a valuable management tool that allows a business company to evaluate its current financial health and apply certain methods to remove the weaknesses and improve progress. The SWOT analysis of NVIDIA is given by

• Strengths

NVIDIA is a dominant force in the graphics segment and has provided its products and services to many other global tech companies. NVIDIA has a strong and stable financial performance, and its success continues to grow due to 14 regional offices. NVIDIA has a benchmark status in graphics processing with many diversified products such as GeForce, Tegra, Grid, and Quadro. The company has a prominent name in the overall gaming industry. NVIDIA holds more than 2,300 patents. NVIDIA has taken strides in AI development and also stepped up in the automotive sector with the NVIDIA Drive platform.

• Weaknesses

NVIDIA sees a decline in sales of GPUs with the rapid advancement in mobile devices. The company also has to face competition from other similar tech companies who have a particular market share. There is slow growth in the gaming sector, and now most people play games through their mobile devices as compared to PCs or gaming console. NVIDIA heavily depends on GPUs for revenue, and the company faces challenges in developing other segments.

• Opportunities

NVIDIA has a massive opportunity to develop mobile chipsets under its Tegra brand, which can be a huge success in mobile computing. NVIDIA has done numerous key mergers and acquisitions over the years, which has allowed the company to grow and attain success. NVIDIA has broad development and applications in the AI sector.

• Threats

NVIDIA faces tough competition from rival brands and economic downturns and currency fluctuations. The competitors of NVIDIA include AMD, Intel, Qualcomm, and Marvel Technology Group. The Cryptocurrency market is going through a decline which has impacted the GPU market. NVIDIA also faces challenges in the automotive market.

Stock Analysis of NVIDIA

NVIDIA is listed and actively trades on the NASDAQ with the ticker symbols ‘NVDA.’ The company is listed under the ‘Electronic Technology’ Sector, and the industry is ‘Telecommunication Equipment.’ NVIDIA is also a member of other indices such as the NASDAQ-100 Index, S&P-100 Index, and S&P-500 Index.

The all-time high share price of NVIDIA was $510.00 on August 25, 2020, and the average price in the last 52 weeks is $280.84.

NVIDIA is not only a leader in the GPU market but has become an essential player in cloud gaming, artificial intelligence, and the future of self-driving cars. The Coronavirus pandemic badly impacted every business, and NVIDIA saw record lows in March, but the share price is doubled due to strong earnings in May 2020 and August 2020.

NVIDIA’s second-quarter results of 2020 were quite positive and better than expected due to increased sales in the data center and gaming segment. The data center sales surged to $1.75 billion, with 167% and for the first time better than gaming sales, which were $1.65 billion. The revenue of NVIDIA was $3.87 billion, which was up from 50% as compared to last year. The Professional Visualization posted $203 million with a decrease of 30%, and the automotive unit also declined, and revenue from this division was $111 million, with a decrease of 47%.

Earlier in 2020, NVIDIA acquired Mellanox for $7 billion, which is a tech firm specializing in connecting chips in data centers. The Covid-19 outbreak has influenced Professional Visualization and automotive sales, but NVIDIA will continue to develop and progress in AI, cloud computing, and autonomous driving. In the third quarter of 2020, NVIDIA expects to get a revenue of $4.4 billion with 46% growth and EPS (Earnings per Share) to rise to $2.18 per share with 22.5% growth. The net sales of NVIDIA grew 45% in the last quarter and almost 10% in the last 3 years.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.