graphics chip maker Nvidia (NASDAQ: NVDA) is the dominant company in its main markets – by far. But with a market cap of $ 557 billion, does Nvidia have enough growth potential to join the trillion dollar club? In this fool live Video clip, recorded on October 11Fool contributor Danny Vena gives his thoughts on the future of Nvidia.
10 stocks we like better than Nvidia
When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Equity Advisor, has tripled the market. *
They have just revealed what they believe to be the ten best stocks that investors are buying now … and Nvidia was not one of them! That’s right – they think these 10 stocks are even better buys.
* The portfolio advisor returns on September 17, 2021
Danny Vena: Everyone knows that Nvidia has the top chips that gamers use. there is no doubt. If you look at the numbers, according to, I think it’s John Poulton’s research that says Nvidia has over 80%. I think the most recent numbers came out at 83% of the discrete desktop GPU market. It’s a cash cow business for them. It continues to generate increasing income, increasing profits. It’s also because of the large cash flow they get from it that they’re able to spend a ton of money on research and development. Several years ago, Jensen Huang, who is the CEO of the company, realized that there was a big push in artificial intelligence and a big push in data centers and he saw how pack those GPUs, or graphics processing units.
Just to save a second here, a graphics processing unit is basically a chip that can do a multitude of math calculations simultaneously and do them at lightning speed. This made it perfect for building AI and machine learning models. He was able to assemble software and hardware that researchers began to use for AI. Even until now, several years later, there is no better mousetrap. No one has found anything that they could sell to everyone that does a better job, faster job, and more efficient job in AI and moving things in data centers than Unity graphics processing.
Now I wanted to share my screen for a minute here because I want to share a recent slide from Nvidia’s investor presentation with you. There are actually two here. First of all, this only gives you the highlights for the most recent quarter. They had record total revenue, record gaming revenue, record data center revenue, and professional viewing revenue, which are basically their top three revenue segments. Overall, revenue grew 68% year over year to $ 6.5 billion. Gaming revenue grew 85% year-over-year to a record $ 3.06 billion. Obviously, their gambling activity is not slowing down at all.
They are also generating record revenues in large-scale IT and data centers. If you think about the big global trend that’s going on right now, the big digital transformation that is going on, a lot of companies are moving a lot of data to data centers. If you look at how that impacted the company’s revenue, I mean, $ 6 billion in the second quarter. We’re talking about an execution rate of about $ 26 billion. Their gross margins are attractive. Look at what their net income increased, 282% year over year, diluted earnings per share of 276%. Operating cash flow up 71%. Almost half of their income is passed on to the bottom line and cash flow from operations.
It’s a really interesting proposition. I don’t see the game slowing down significantly, especially as they continue to steal market share. I think data centers and AI are only just starting to embark on digital transformation. I see this as a company that is right at the intersection of two of the biggest trends we are experiencing right now. That’s why I’m still a big seller on Nvidia and why I think this title is still a buy, even though the title has practically quadrupled in the past two years since the end of 2019. That’s a huge payout. I don’t think it’s done yet and it’s on my list of stocks that I think will have a $ 1,000 billion market cap in the years to come.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.