I have been an NVIDIA (NVDA, Financial) bull for two years now; however, I recently cited the rich valuation of the stock as a headwind for investors. Although NVIDIA’s business model is strong, the stock will head lower if the current market turmoil continues. The company’s long-term prospects look great, but investors can wait for a better entry point into the stock.
NVIDIA’s leading GTX 970 graphics card
Nowadays the vast majority of gamers is shifting toward Steam to buy, download and play games instead of buying DVDs. The most important thing worth noticing about Steam is that every month it conducts a survey regarding hardware that gathers data on the different types of components that Steam users have in their machines.
This data is very important and beneficial for game developers as it permits them to recognize what type of hardware they can practically mark for their games. The main thing regarding this data for the investment community is that it permits one to acquire a preview into what gamers are purchasing and market share alterations amid component sellers.
In January, as per the hardware survey from Steam, NVIDIA’s GTX 970 holds a leading position in the tech market and accounts for the most prevalent graphics processor among players, netting 4.28% market share among all Steam users who took part in the survey.
NVIDIA’s GTX 970 was in first position followed by Intel (INTC, Financial) HD Graphics 4000 in the second position with 3.19% market share, and then NVIDIA’s GTX 960 holding third position with 2.53% market share.
All in all, NVIDIA’s GTX 970 has been and continues to be an enormously prosperous product for the graphics expert company.
A great opportunity
Virtual reality signifies a huge opportunity for novel takes on surviving mediums while also flagging the tactic for uses and applications that are only conceivable with the new technology. The victory of the virtual reality push in gaming could throw the light on how rapidly the technology will go mainstream.
Giant tech firms comprising Facebook (FB, Financial) and NVIDIA itself are targeting to offer a service platform for virtual reality applications, and the appearance of early front-runners could do a lot to figure the growth of the technology. NVIDIA clearly has an early movers advantage in many of the future technologies, which is why I think the stock will turn out to be a winner in the long term.
Conclusion
Despite the weakness in the PC industry, NVIDIA is a great long-term investment. However, it would be wise for investors to wait for a better entry point as the stock could fall in the coming weeks. NVIDIA is currently trading at 24x trailing earnings, and the valuation is expensive given the current market sentiment. New investors should wait for a 10%-plus drop before starting a position in the stock.
