Why NVIDIA Still Has Massive Upside Potential

NVIDIA (NASDAQ:NVDA) has managed to surpass the expectations of even the most optimistic bulls as the stock has continued moving higher. On top of that, the company still has not shown any signs of slowing down, continuing to grow at a healthy clip. The company’s graphics cards business is growing after the launch of its new Pascal architecture.

NVIDIA’s foremost rival, Advanced Micro Devices (NASDAQ:AMD), also launched its new Polaris architecture to compete against NVIDIA’s Pascal architecture, but it seems like NVIDIA has taken a lead over Advanced Micro Devices in this race. Initially, Advanced Micro Devices strategized to place its emphasis on the mainstream market, launching its new RX 480 card for $199.

However, NVIDIA also launched two variants of new graphics card GTX 1060, priced at $249 and $199. Both cards are highly efficient and are performing better than competitors.

• NVDA 15-Year Financial Data
• The intrinsic value of NVDA
• Peter Lynch Chart of NVDA

Moving onward, the company has recently debuted two new graphics cards, the GTX 1050 and GTX 1050 Ti. Both the cards are based on its new Pascal architecture and, most importantly, are priced at $109 and $139.

The company detailed that both cards are excellent for new gamers. A few years ago, NVIDIA’s strategy was to grasp a strong hold on the high-end graphics cards market. The company has since changed its strategy, as it governs the low-end graphics card market as well.

It is very clear that NVIDIA has dominated Advanced Micro Devices consistently for years, but this year Advanced Micro Devices showed an unexpected improvement in performance due to its pricing power, as it initially launched graphics card for mainstream users.

Once again, NVIDIA’s new graphics cards will directly compete against Advanced Micro Devices' two variants of the RX 460 model, which are priced at $109 and $140. However, it seems that Advanced Micro Devices' advantage of offering low-end graphics cards has come to an end since the company’s recent quarterly report was not as strong as investors were expecting.

Conclusion

Given NVIDIA’s strengthening core business, there is no reason for investors to think that the stock’s rally has come to an end. NVIDIA can still continue moving higher, which is why I think the stock is a buy.

Disclosure: I don't hold a position in the stocks mentioned in the article.

Start a free 7-day trial of Premium Membership to GuruFocus.