Market cap

NVDA Stock: A New Game Service Worth $ 15 Billion In Additional Market Cap?


At present, investors are well aware of that of Nvidia (NASDAQ:NVDA) October 21 announcement regarding its GeForce NOW RTX 3080 Membership which allows gamers to stream over 1,100 video games up to 1440p at 120 FPS. Yet despite all the excitement, NVDA stock only rose 2.7% that day.

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However, with nearly 2.5 billion shares outstanding, Nvidia’s market cap gained $ 14.7 billion in one day of trading. This single-day gain is greater than the market capitalizations of 88 companies in the S&P 500.

So, I wonder if the company that was once worth a trillion dollars deserved an almost $ 15 billion increase in its market capitalization. Here is the opinion of a non-technician on the matter.

RTX 3080 presents an opportunity, but how big is it?

Nvidia’s GeForce NOW membership currently stands at more than 12 million players. If each member opted for the RTX 3080 membership, which costs $ 200 per year, it would be $ 2.4 billion in annual revenue.

In fiscal 2021, the company’s Graphics segment generated revenue of $ 9.83 billion. GeForce NOW is part of this unit. While I I have no idea how much revenue the company generates from its GeForce NOW streaming service, I’m sure it’s nowhere near $ 2.4 billion. I’m also confident that the 12 million members won’t be subscribing to the $ 200 offer for the full year, although that seems like a pretty good deal for serious gamers.

I am not. Not even close. However, at the end of September, Nvidia’s press release announces its partnership with Electronic arts (NASDAQ:EA) made a statement that sticks to someone who is not a computer enthusiast:

“GeForce NOW enables Electronic Arts games to be played with the legendary performance of GeForce® by gamers who may not have a gaming PC, which includes over a billion underpowered PCs and more. ‘incompatible devices, such as phones, tablets, and Chromebooks. Almost 80% of devices that currently access GeForce NOW would otherwise not be able to play the latest PC games. “

The ability for underpowered or incompatible devices to access the latest games with improved performance will certainly help broaden the appeal of the latest level of membership. If 10% of the billion underpowered PC owners were gamers, and 10% of those people paid the $ 200 annual subscription, that would be pretty close to the $ 2.4 billion figure mentioned earlier.

If that happened, what appears to be an unimportant part of Nvidia’s business would suddenly contribute over 10% of the Graphics segment’s annual sales. Every little bit counts. This is especially true for a business with nearly 34% of operating margins.

Maybe there is nothing there

The motley fool Rich Smith has a different take on the news. He’s not convinced there’s much to the recent announcement. At least not enough to justify nearly $ 15 billion in additional market capitalization.

Smith points out that some of the 12 million players on the platform are probably playing for free. So making them pay $ 200 each year for a GeForce NOW RTX 3080 subscription seems like a big step forward.

Interesting way, The edge points out that NVIDIA will begin by offering the $ 200 deal to its Existing Founders and Members of Priority GeForce NOW in the United States and Europe. So as far as I know that excludes non-paying scum which also means it reduces potential short-term income.

Like many things in life, the answer is probably somewhere in the middle. Therefore, it’s safe to say this isn’t a game-changer for Nividia, but it’s not trivial either. This will improve the gaming experience for a large number of players and bring additional revenue to the company.

The result on NVDA shares

Although Nvidia’s market cap is $ 577 billion as of this writing, questions about when it will join the trillion dollar club have already started.

I continue to be A big fan from Nvidia CEO Jensen Huang. If anyone can get the company to a trillion dollar market cap ASAP, it’s Huang.

Looking back a few years from now, I don’t think the $ 200 membership will be what puts Nvidia above it. However, that does not mean that he will not have an important role in achieving it.

After all, the GeForce NOW RTX 3080 subscription will feature some of the best tech in the business. This makes the streaming service the technological equivalent of a billboard. Advertising works.

As of publication date, Will Ashworth did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the Publication guidelines.

Will Ashworth has been writing about investing full time since 2008. His publications include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and several others in the United States and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


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