Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19
The Unknown Tech Stock Transforming The Internet - 10th Sep 19
More Wall Street Propaganda - 10th Sep 19
Stock Market Price Structure Still Suggests We Are Within Volatile Rotation - 9th Sep 19
Stock Market Still Treading Water - 9th Sep 19
Buying Pullbacks in Silver & Gold - 9th Sep 19
Government Spending - The High Price of a "Free Lunch" - 9th Sep 19
Don't Worry About a Recession - 9th Sep 19
Large Drop in Stocks, Big Rally in Gold and Silver - 9th Sep 19
US Stock Market Hasn’t Cleared The Storm Yet - 8th Sep 19
Precious Metals Were Ripe for a Pullback - 8th Sep 19
Market Chart Patterns to Spot High-Confidence Trading Opportunities in a "Pinch"! - 8th Sep 19
Five Feet High And Rising - Stock Market Bulls False Sense of Security - 8th Sep 19

Market Oracle FREE Newsletter

The No1 Tech Stock for 2019

One Stock to Buy for the Next 5 Years, Nvidia—Here’s Why

Companies / Tech Stocks Sep 28, 2018 - 02:24 PM GMT

By: Stephen_McBride

Companies

If I could only buy one stock for the next five years… it would be Nvidia (NVDA).

Take a look at its 720% surge since 2016:


https://images.riskhedge.com/media/uploaded-files/Image_1_20180913_RH.png

Now I know you might be thinking: Stephen, this stock has already had a heck of a run… why buy it now?

I understand the concern.

But when investing in truly disruptive companies, this way of thinking is often a mistake.

From 2009–2013, Amazon (AMZN) stock gained 680%. Most so-called “experts” said the easy money had already been made. In 2013, CNN “reported” that “Amazon is one of the most overvalued stocks.”

Amazon has soared another 700% since 2013.

Nvidia Makes High-Performance Graphic Processing Units

Nvidia developed the first mass-market graphic processing unit (GPU) in 1999. GPUs use what’s called “parallel processing,” which allows the chips to perform millions of calculations at the same time.

That’s different from the way other computer chips work. Most computer chips, like the one powering the laptop or phone you’re reading this on, calculate one by one.

At first, GPUs were mostly used to create realistic graphics in video games. Remember the blocky Nintendo graphics from the early ‘90s? The ability of GPUs to process huge amounts of data all at once helped create the movie-like video game graphics you see today.

GPUs Are Ideal for “Training” Artificial Intelligence

I’m sure you’ve seen the Hollywood movies about AI going rogue and attacking humans.

In reality, AI isn’t that glamorous. It all comes down to processing massive amounts of data.

Show a computer millions of pictures of a stop sign, for example, and it will learn to recognize stop signs on its own in the real world.

AI is the driving force behind Google’s self-driving car subsidiary Waymo. As I recently discussed in the RiskHedge Report, Waymo’s robot cars are cruising around America’s roads right now.

At the core of Waymo’s self-driving car fleet is a centralized “brain.” It has learned to recognize stop signs, pedestrian crossings, red lights, and all the other obstacles that human drivers navigate.

The Likes of Amazon, Google, and Microsoft Use Nvidia Chips to Train Their AI

The faster a computer can process data, the faster it can “learn” by recognizing patterns in the data.

Nvidia latest chips process 125x faster than traditional computer chips. They can process 125 trillion data points per second… which slashes AI “learn” times from eight days to eight hours.

This is why more than 2,000 companies including Amazon, Google, and Microsoft use Nvidia’s hardware to “train” their AI programs.

Last quarter, the revenue Nvidia earned from selling AI chips and hardware jumped 82%. In the last two years, AI-related sales have accounted for over 70% of the surge in Nvidia’s revenue. AI sales now make up 24% of its total revenue.

Most Self-Driving Car Companies Use Nvidia’s Products

As I mentioned, Nvidia supplies self-driving car companies with chips that “train” cars’ brains. It also sells hardware that processes data from the cars’ many cameras and sensors.

For example, Nvidia’s self-driving supercomputer, named Pegasus, can tackle 320 trillion operations per second. And it does so using one-third the electricity at just one-fifth the cost of its closest competitor.

Over 370 companies working on self-driving cars now use Nvidia’s products. Auto sales make up just 5% of NVDA’s total revenue today, and I see this exploding higher over the next few years as true self-driving cars roll out.

I mentioned earlier that $100 billion has been spent on developing self-driving cars so far. With the likes of Google and Apple pouring billions into driverless projects, I see that jumping to $1 trillion over the next two to three years.

Thanks to its superior technology, I expect Nvidia to capture a large chunk of this.

It’s a “High-Flying” Tech Company, but Extremely Profitable

Nvidia is nothing like many of the barely profitable tech darlings (like Netflix) out there.

While many high-flying tech stocks get by on stories and hype, Nvidia is extremely profitable.

It has a net profit margin of 33%. That is, for every $1 in sales, $0.33 becomes pure profit.

That’s better than Google’s 21% margin… and even Microsoft’s 29%.

Nvidia’s high margins allow it to continually pour cash into Research & Development (R&D). It reinvests close to 20% of its revenue into R&D every year, which is a key reason why it has blown away its rivals.

Nvidia is financially sound, too. It’s sitting on a record $7.95 billion in cash. Which is enough to pay off its total debt four times over.

Why I’m Not Concerned About Nvidia’s Price-to-Earnings (P/E) Ratio of 39.

Can buying a stock at such a high valuation be risky? Sure. But Nvidia deserves its rich valuation.

Nvidia’s earnings are growing at almost six times the rate of the S&P 500. Yet its P/E ratio is not even double the S&P’s.

I think investing in a company like Ford (F), with a P/E of 5, is far riskier than buying NVDA. I can hear the groans coming from the value investors out there. But the fact is, Nvidia is leading the self-driving revolution… while Ford is going to get crushed by it.

Because it is powering today’s most disruptive trends, I see Nvidia doubling over the next two years.

By Stephen McBride

http://www.riskhedge.com

© 2018 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules