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Investing in Nvidia? Key Points to Consider First

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Dec. 4 2020, Updated 10:52 a.m. ET

Nvidia’s diversified operations propel growth

Previously in this series, we learned that Nvidia (NVDA) posted 5% YoY (year-over-year) growth in its fiscal 2Q16 revenues. In spite of the softness in the PC market, Nvidia managed to grow thanks to strong uptake of its GeForce GPUs and automotive infotainment systems. The launch of Drive PX and Drive CX in fiscal 1Q16 also propelled this growth.

Nvidia’s management has declared that it will continue to invest in its strategic growth areas, namely gaming, deep learning, and self-driving cars.

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Why the gaming space remains Nvidia’s growth platform

Titan X’s capabilities include its ability to drive 4K games and VR (virtual reality) titles. These gaming technologies, along with the Microsoft’s (MSFT) Windows 10 launch and Intel’s (INTC) Skylake platform launch, are expected to drive growth in the gaming space, especially in PC gaming.

Rob Csongor, vice president of investor relations for Nvidia, said that PC gaming represents approximately 40% of the global gaming market—more than phones, consoles, tablets, or any other single gaming segment.

In fiscal 1Q16, we noted that Nvidia had identified gaming, enterprise, automotive, high-performance computing, and cloud computing as the key areas driving its growth. These segments contributed more than 85% of the firm’s overall revenue in 2Q16, up from 80% in 1Q16 and 68% in 2Q15.

3Q16 expectations

In fiscal 3Q16, Nvidia expects revenue to range between $1.16 million and $1.2 billion.

If you’re bullish about Nvidia, you could invest in the VanEck Vectors Semiconductor ETF (SMH) and the PowerShares QQQ Trust, Series 1 (QQQ). SMH and QQQ invest about 1.94% and 0.22% of their respective holdings in Nvidia.

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