NVIDIA (NVDA, Financial) has performed well over the last couple of years, with the stock appreciating over 200% due to its strong growth and potential. While NVIDIA, at 41.5 times trailing earnings, may look expensive, the company can easily justify that price tag going forward.
NVIDIA Is an Undisputed Leader
At present levels, NVIDIA and AMD (AMD, Financial) are the only two significant players in the graphics cards industry. Both the companies are putting in a lot of effort to gain a leading position in the virtual reality market. However, both the companies are well positioned to gain huge benefits from the gradually rising VR market.
Over the past few years, NVIDIA has fortified its core PC GPU business by launching efficient products and snatching considerable amount of market share from its foremost rival AMD.
Moreover, the company has also strapped into the enterprise, setting its graphics chips as the standard for hastening workloads, specifically in the segments of deep learning and artificial intelligence. Apart from this, the company has successfully taken a leading position in the autonomous car market by offering unique and efficient products.
To maintain its position, the company introduced several graphics cards based on its latest Pascal architecture. To preserve the momentum, it is necessary for the company to maintain its control in the accelerator market and endure in growing its automotive business.
Given the multiple positives, I think NVIDIA cannot only grow into its current valuation, but justify higher levels in the future.
NVIDIA and Baidu Are on the Same Ship
NVIDIA has several versions of Drive PX computers, but the latest version offers auto manufacturers and Tier 1 suppliers a superior energy efficient version that still includes robust artificial intelligence, as well as neural networking proficiencies.
This is the reasoning behind Baidu’s (BIDU, Financial) use of  the new version in its HD map based self-driving product for auto manufacturers. The company has formerly done immense driverless car testing in China, and most importantly, is beating Google (GOOG, Financial) in various self-driving aspects. The company plans to run autonomous vehicles on Chinese roads in the imminent two years.
Due to this, NVIDIA will benefit greatly, as its driverless car technologies were formerly used by 80 auto manufacturers and Tier 1 auto suppliers. Its new upcoming Drive PX 2 single-processor chip should help it to conserve that robust position.
Furthermore, the company revealed it will begin retailing the latest version of processor in the fourth quarter of 2016.
Conclusion
Looking ahead, NVIDIA seems to have massive growth potential baring an economic downturn. The company is growing into several sectors that are destined to become mainstream in the long run, thereby justifying NVIDIA’s current price and making it a good pick for long-term investors.
Disclosure: No Position.
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