NVIDIA stock has doubled in the past 12 months but why is the stock so highly valued and what has been driving the growth?
NVIDIA Corporation operates a worldwide visual computing company comprised of two segments, Graphics and Compute & Networking. The Graphics segment is perhaps the most well-known, providing GeForce GPUs (Graphics processing units) for PCs & Gaming, the GeForce NOW game streaming service & related infrastructure, and solutions for gaming platforms.
The Compute & Networking segment offers Data Centre platforms and systems for AI, HPC (High-performance computing), and accelerated computing.
As of Q4 2020 NVIDIA dominated with 82% market share of the discrete graphics segment (video cards) and its overall GPU market share stood at 15%, as Intel predominantly holds dominance in the cheaper segment.
Some of the key factors that have contributed to NVDIA's growth:
- Platform strategy - NVIDIA's offers best -in-class quality GPUs that provide high performance and a software toolkit to further improve the performance of AI apps. This strategy creates in effect a platform for NVIDIA to leverage their hardware and software to serve a variety of industries.
- Data centre platform - NVIDIA's high performance chips are combined with programming models that allow the chips to process huge amounts of data efficiently. Because of this, NVIDIA has attracted some big customers including Amazon Web Services, which has helped their data centre business to undergo massive growth in recent quarters.
- Mellanox acquisition - In Q2 2020, NVIDIA purchased the leading supplier of high performance networking products. Through this $7 billion deal, NVIDIA was able to enhance their data centre offering by providing high performance and improving efficiency for their customers.
- Automotive division - an end to end platform for autonomous driving, that processes in real time what is happening around the vehicle.
In Q1 of fiscal year of 2021, both segments showed strong year on year growth, with 81% for Graphics and 88% for Compute & Networking.
On May 21, 2021, the company's board of directors declared a four-for-one split of NVIDIA's common stock payable in the form of a stock dividend, with the additional shares distributed on July 19, 2021.
Kalin Tsenov has a strong research background in economics with specific interests in Geopolitics and its impact on the Financial Markets.
He joined FXCM in 2018 after obtaining a Bachelor's Degree from Leeds Metropolitan University. Initially starting as a Business Analyst in the Payment Solutions department, he is currently a Product Specialist in the Firms Product & Strategy department.