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"Investor days" are generally dull affairs. Companies offer slick presentations telling us what we already know from their filings.
But Nvidia's was the complete opposite. Nvidia stock just surged 10% to all-time highs. And even bigger gains could be on the way.
Why Nvidia Stock Is Up
The reactions around Nvidia's investor day were incredibly positive as it laid out not only the future for Nvidia, but several entirely new products.
As the maker of chips powering technologies like artificial intelligence, 5G, self-driving cars, and quantum computing, everyone was paying attention.
With that attention, it made a huge announcement. In addition to its line of well-known graphics cards and mobile processors, it would start to compete head to head with Intel Corp. (NASDAQ: INTC) and Advanced Micro Devices Inc. (NASDAQ: AMD) in the CPU market.
While it is not going after the desktop and laptop space, which Apple has already started to encroach on with its recently announced M1 chip, it is going after the highly sought-after data center market.
Nvidia believes it can deliver 10x the performance of today's fastest servers that are handling complex AI and high-performance computing workloads.
This may be a niche focus within a $25 billion market, but the integration with its GPU and DPU products could give it an edge. Intel and AMD don't offer the complementary products.
We could end up seeing these chips be very popular for big tech companies such as Alphabet Inc. (NASDAQ: GOOGL) or Facebook Inc. (NASDAQ: FB). Research firms building the world's fastest supercomputers will look to advance artificial intelligence technology too.
Last year, Nvidia earned a record $6.7 billion in data center revenue, and this move could help to boost these numbers even more. Growth in this division was up 125% from a year ago. While the chips won't be set to release until 2023, we could see expansion to other markets in the future, a move which could add even more value to the stock.
That wasn't all Nvidia revealed...
Why Nvidia Stock Is a Buy Now
For the most part Nvidia is known as a hardware company, but it actually has a software business. That will work on AI Enterprise, a suite of AI and data analytics software for enterprise customers, an opportunity that could be worth billions for the company. We don't often think about Nvidia as a software company, but a great example is its software built around autonomous driving that allows for features such as sensor fusion and perception.
During the company's investor day, it also reported that revenue for Q1 2022 was tracking above its previously announced outlook, which likely means strength across all of its business lines.
This is likely due to continued growth in gaming, crypto mining, and automotive, which has bounced back sharply and continues to grow as more technology goes into every vehicle. Nvidia also announced a new professional graphics card that could fit these applications.
Even though the automotive business was down in 2020 compared to the previous year, it now has over $8 billion in its pipeline through fiscal year 2027.
While the Nasdaq has continued to make new highs, Nvidia had been trading close to flat for roughly six months. Now that we have had a major announcement on new product lines, higher future growth projections, and a semiconductor shortage that could last through the end of the year, Nvidia stock could continue to run higher.
And while Nvidia will be a key player in the 5G boom, even bigger opportunities are out there...
$1.4 Trillion 5G Aftershock
5G is creating a $1.4 trillion aftershock market.
And 20 small companies could produce 10X gains by the end of the year.
About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.