Despite the seemingly rich valuations, NVIDIA (NVDA, Financial) has continued its upward trajectory. The company has multiple tailwinds that can help it sustain its growth going forward.
According to the most recent quarter, the company’s sales increased 12% year over year to $1.4 billion, surpassing estimates by $90 million. NVIDIA’s GPU revenue increased 10% to $1.18 billion, mainly due to 10% growth in Tesla (TSLA, Financial) GPUs, 7% growth in Quadro workstation GPUs and 21% sales growth in gaming GPUs.
In addition, NVIDIA’s gaming GPU sales were sustained by upgrades for gaming PCs, which have been cloistered from the slowdown in the PC segment. The company also introduced a new Virtual Reality development kit to benefit from the rising demand for virtual reality games.
Still a leader
NVIDIA holds a leading position in the GPU market, and is putting a lot of effort to make its presence stronger in the automotive sector. In 2015, the company won almost every battle against its foremost rival AMD (AMD, Financial). Presently, the company’s chips are installed in infotainment and digital gauge clusters in approximately 8 million vehicles and has around 25 million more in the process.
NVIDIA’s shift to install chips in innovative infotainment and digital gauge systems is just a trailer right now in the automotive industry. However, the main focus has been on manufacturing self-driving vehicles as a reasonable reality for a secure world.
Ford (F, Financial) and General Motors (GM, Financial) have previously agreed to develop automatic, smart, and emergency braking standard by 2022, but automatic braking is just a small thing compared the technology coming in the future. Moreover, the company is forecasting Uber cars and taxis that will entirely change transportation from what is available today.
At present, Volvo believes that around 70% of accidents take place between 0 to 20 mph, mainly due to braking issues. Apart from this, the company presently comprises 50 automakers, tier 1 suppliers and research groups that are using the semi-autonomous and autonomous car platform Drive PX.
Conclusion
The automotive sector holds a great opportunity for NVIDIA and by the looks of it, the company is doing its best to capitalize on the opportunity. In addition, the company’s presence in the gaming sector is also growing stronger consistently. I like everything about the company except its valuation. NVIDIA’s presence in multiple booming markets can help it sustain its present valuation.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
