Nvidia’s Long-Term Bull Run Won’t Stop Soon

Nvidia (NVDA) stock skyrocketed over 120% in 2021, taking its market cap past the $600 billion mark. With such massive gains in the past couple of years (even after its recent dip), many would question its remaining upside. However, with multiple growth vehicles in motion, NVDA stock has the potential to soar higher this year.

NVDA stock has been an incredible performer over the last decade generating upwards of 6,700% in returns. Consequently, the company has become the largest semiconductor enterprise in the world.

Much of it is down to Nvidia’s ability to consistently tap into new trends and grow its top and bottom lines at a remarkable pace. The company has generated market-beating financial results in its sector, with virtually every metric in the green in the past several years. Revenue and EBITDA growth, for instance, has expanded by double-digits over the past five years. Moreover, in the past five years, its free cash flow growth has averaged at 57%.

Nvidia has been a juggernaut in the discrete GPU market and a pioneer of the modern GPU. Though it mainly targeted high-end gamers with its products, it has quickly evolved into a leading full-stack tech company. Consequently, it has expanded its use-cases in various enormous markets to significantly increase its total addressable market.

Massive Software Opportunities

One of the key arguments of the bears against Nvidia relates to the potential slowdown in its hardware sales as we advance. As it stands, the company is still killing it with its hardware business; however, a slowdown seems imminent.

Hence, Nvidia will have to complement its hardware business through its promising software stack. It’s still early days for its software business, but estimates suggest that it could add billions to its top-line in the future. With the power of artificial intelligence (AI), its enterprise stack is likely to play a massive role in its future.

Nvidia has the potential to tap into a multi-billion dollar AI opportunity. It has access to tons of data through its hardware business and software platforms such as GeForce Now and its newly-introduced Omniverse engine. Moreover, it is a leading developer of AI chips and has an 83% share in the discrete GPU market. Additionally, its GPUs dominate the data center market as well.

Furthermore, the Omniverse is another fascinating growth area that Nvidia has yet to tap into. However, it’s tough to put several in these opportunities at this stage, as the metaverse concept is still relatively new. However, with tech giants looking to ramp up their investments in the sector, these opportunities are likely to be massive.

The Omniverse engine will provide the tools necessary for firms to develop their metaverses. Experts suggest that every company will need to develop its metaverse strategy in the future. Hence, Nvidia is in a tremendous position to leverage the power of its hardware stack to help companies develop their metaverses through the Omniverse engine.

Stellar Gaming and Datacenter Results

Nvidia is the leading supplier in the fast-growing gaming market. Its GPUs are a no-brainer for gamers looking for industry-leading efficiency and performance. Moreover, its GPUs power more than 150 million gaming PCs worldwide. It’s had such a hold over the sector that its gaming revenues are nearly three times the revenues of its second-best competitor.

In the past five years, its gaming revenues have grown at a whopping 22% on average. Moreover, these revenues amounted to $3.2 billion in its most recent quarter, up 42% from the prior-year period.

Furthermore, its cloud gaming service called GeForce Now also grows at a rapid clip. It enables its users to stream thousands of games on their devices effectively. Nvidia has partnered up with top video game developer Electronic Arts (EA) to bring some of its top franchises to the platform.

Moreover, it has also struck deals with Samsung and AT&T (T) to offer its gaming service to their TVs. As a result, the platform now boasts a membership base of over 10 million. The gaming sector is set to grow from $229 billion last year to $545.98 billion by 2028, at a cumulative growth rate of 13.2%.

Likewise, during its third quarter, Nvidia’s data center sales shot up a mighty impressive 55% to $2.9 billion. The company is a massive beneficiary of the rising adoption of AI and the expansion of cloud computing. Its chips enable its users to make the most of their data, with various functions including machine learning, analytics, and whatnot.

Wall Street’s Take

Turning to Wall Street, NVDA stock earns a Strong Buy consensus rating. Out of 26 analyst ratings, there have been 24 Buys and two Hold ratings assigned in the past three months.

The average NVDA stock price target is $359.17, implying 53.7% upside potential. Analyst price targets range from a low of $285 per share to a high of $400 per share.

Conclusion

Nvidia has proven its mettle as one of the top tech companies globally. Despite concerns over its lofty valuation, it still has plenty of remaining upside, which could take its valuation to new heights. It has several growth vehicles in motion and will benefit from multiple tailwinds for the foreseeable future.

The metaverse opportunity looks fascinating and could pay many dividends down the road. It develops 3D design and simulation tools for designers in building metaverses. The Omniverse engine has over 100,000 creators already, and the company may charge annual licensing fees of $1,000 per user in the future.

It will be interesting to see the future of the engine and where it could take Nvidia’s addressable market. It is already a behemoth with its industry-leading position in the gaming and data center businesses. However, its expansion into new verticals such as the metaverse and autonomous driving could take things several notches up.

Hence, I expect Nvidia to continue generating handsome returns for its shareholders for the foreseeable future. Though concerns surrounding its valuation are valid, with so much on its plate and everything going exceeding well, it’s tough to deny NVDA stock.

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