Investors have been fleeing Nvidia Corp. (NASDAQ: NVDA) like it's on fire. But don't be fooled: This stock has big gains to deliver in the near future.
In fact, this may be the best deal available in the stock market right now.
After peaking around $290 at the beginning of October, NVDA has lost roughly half its value. Today, it trades at just under $145.
The culprit: the end of the cryptocurrency bubble.
Nvidia's graphics processing units (GPUs) are used to mine a number of cryptocurrencies, and they became a hot commodity over the last year or so as people were scrambling to get in on the action.
That, it turned out, was unsustainable. And now that the crypto craze has died down, Nvidia is left with surplus inventory on its hands.
As a result, investors are scrambling for the exits. Even Softbank Group Corp. (OTCMKTS: SFTBY), one of NVDA's largest holders, is reportedly planning to dump its shares.
(At a $3 billion profit, it should be noted.)
There's just one problem with this narrative of Nvidia's demise: It's not a cryptocurrency company.
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Of all the reasons to buy this stock, cryptocurrency was maybe fourth or fifth on the list. So now that the cryptocurrency boom has gone bust, it makes sense to shave a little value off the stock price.
But 50% is a massive overcorrection.
However, that's good news for our readers. Because NVDA has just gone from being a great buy to a must-have stock.
As Money Morning Chief Investment Strategist Keith Fitz-Gerald says, investors are likely to come rushing back after the dust settles and they see the value they left on the table.
Right on cue, our Money Morning Stock VQScore™ system just upgraded NVDA to a top score.
Now, cryptocurrencies could have a comeback, even if the frenzy of 2017 never returns. If and when that happens, Nvidia will likely benefit from it.
But the stock's real value lies elsewhere. Because over the last several years, the company has positioned itself as a leader in several of the biggest up-and-coming sectors in the tech world, including esports, virtual reality, artificial intelligence, and even self-driving cars.
Unlike cryptocurrencies, those are markets that are on an unstoppable rise.
Video Gaming Is Entering a New Era of Profitability
Over the last several years, Nvidia has branched out far beyond the video game market that had been its primary focus since the 1990s. Frankly, the video game market alone might be reason enough to recommend the stock.
That's in part because of the rise of esports.
That's right. One of the hottest trends right now is the rise of professional sports leagues centered around video games. The leagues have franchises, player contracts, sponsors, and everything else you would see in any major professional sport.
Including spectators - lots and lots of them. This year, the final round of the League of Legends World Championship drew nearly 100 million viewers. Those are just about on par with the Super Bowl.
Gamers in these leagues don't need helmets or cleats, and they certainly don't need compression shorts. But when a split second of lag time can compromise a player's performance, a great graphics card is essential gear. And Nvidia is one of the top providers.
According to Newzoo, esports is expected to bring in $1.1 billion next year, up from $493 million in 2016. As the money rolls in, Nvidia will be to esports what Nike Inc. (NYSE: NKE) is to sports like baseball, football, and basketball.
Hand in hand with the rise of esports is the entrance of virtual reality into the mainstream. According to Orbis Research, virtual reality is set to be a $40 billion market by 2020.
Nvidia is one of the major companies leading the way in the VR market. Its GPUs were the first to power PCs that were compatible with the Oculus VR headset - and also the first to power VR-ready notebooks.
The company also produces the VRWorks software development kit, which is used by top developers like Sólfar Studios and Valve Software to create some of the most popular new VR experiences on the market.
The innovations don't stop there. And as virtual reality begins to permeate our media environment in the next few years, Nvidia stands to reap huge benefits.
But when it comes to NVDA's value as a stock, video gaming is just the tip of the iceberg...
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Nvidia's AI Is Leading the Drive Toward Autonomous Vehicles
If video games aren't your thing, there's still a good chance that Nvidia's technology will be entering your orbit soon, if it hasn't already.
That's because of the company's push into artificial intelligence and machine learning over the last several years.
This is yet another rapidly growing market for Nvidia. MarketsandMarkets reports that the AI market is set to grow nearly nine-fold between 2018 and 2025, from $21.46 billion to $190.61 billion.
Nividia's AI technology has led to a partnership with Alphabet Inc. (NASDAQ: GOOGL) on its Google Assistant interface, as well as with robotics giant Fanuc Corp. (OTCMKTS: FANUF) to increase the learning capability of factory robots.
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But perhaps the most exciting application for Nvidia's artificial intelligence is in self-driving cars.
The autonomous vehicle market is expected to reach $54.2 billion in 2019, according to Allied Market Research. By 2026, it will be more than 10 times that.
Nvidia's Drive AGX self-driving platform is already being installed in cars for Volkswagen AG (OTCMKTS: VLKAF). And Drive AGX-equipped cars will be coming soon from Audi AG (OTCMKTS: AUDVF), Volvo AB (OTCMKTS: VLVLY), and Tesla Inc. (NASDAQ: TSLA).
Nvidia self-driving is not just for cars either. Trucks made by PACCAR Inc. (NASDAQ: PCAR) are sporting Drive AGX, and so are fleet vehicles deployed by Deutsche Post AG (OTCMKTS: DPSGY).
A partnership with Daimler AG (OTCMKTS: DDAIF), which makes Mercedes-Benz autos, shows off even more of what Nvidia can do. The voice-activated Mercedes-Benz User Experience (MBUX) learns a driver's preferences over time and can make smart suggestions about music, directions, and various other settings in the car. It converses in plain language and features a beautiful 3D touchscreen display.
So, does this sound like a company that's going to be sunk by the decline of cryptocurrencies?
We didn't think so. And a look at Nvidia's fundamentals paints a completely different picture than the one the financial media is painting right now.
Now Is the Time to Buy NVDA
While Nvidia's stock price has been plummeting, the important numbers are skyrocketing. Sales have nearly doubled since 2016, and profits are on pace to jump more than 50% for the fiscal year ending next month.
That may be why, in spite of all the negative coverage, a majority of analysts tracked by FactSet still consider NVDA a "Buy." The average price target is more than 50% higher than its current price.
But even that may be selling Nvidia short. A look at its price/earnings to growth ratio for the last 12 months suggests the stock is selling at a 77% discount right now.
And that's just based on past performance - not factoring in the enormous growth on the way in Nvidia's key markets.
That's why, while the media chatters on about the latest bit of news, it's important to take a step back and look at the big picture.
Case in point: Even after the stock's big drop, NVDA is still up nearly 850% over the last five years - compared to less than 45% for the S&P 500.
When all is said and done, the cryptocurrency boom and bust will be little more than a blip in Nvidia's long-term rise. We're talking about a company that has already enjoyed fantastic success and that Money Morning Defense and Tech Specialist Michael Robinson says "hasn't even hit its stride yet."
Buy your shares now, while they are at bargain prices, and watch them return big gains in the years to come.
"The sky is truly the limit" for Nvidia, says Michael.
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About the Author
Stephen Mack has been writing about economics and finance since 2011. He contributed material for the best-selling books Aftershock and The Aftershock Investor. He lives in Baltimore, Maryland.