What’s up and Happy Friday! This is the last weekday of the first half of 2018! Lets take a look at a stock that you can add to your forever portfolio. This month’s pick is a company called NVIDIA (NVDA). NVDA is a semiconductor company whose components power many of the most popular devices used today…primarily in the computing sector. The company’s stock is about 10% off of it’s all-time and I believe that now is a great time to add NVIDIA to your portfolio.
The recent selloff in NVIDIA has been caused largely by the political strife looming and uncertainty between the US and China regarding potential Chinese investment restrictions in US tech companies. With a long-term perspective though, this 10% drop provides a great buying opportunity into a company who has multiple avenues to future growth.
First off, NVIDIA has a new gaming chip launching soon which will be a boon to near term earnings. The gaming sector continues to grow at a rapid pace and while the actual gaming companies (ATVI, EA, TTWO) get most of the glory, the companies whose technology power these games have benefited greatly as well. While this “legacy” sector for NVDA is still performing bigly (yes, it’s a word now), it isn’t what gets investors the most excited about for the future…
With NVIDIA, the big driver of growth in both revenue and stock price will be it’s involvement in the evolution of Artificial Intelligence (AI). The expected market for AI products is expected to grow by nearly 1000% or 10x in the next 7 years. With that in mind, NVIDIA is one of the leading companies in this growing field of technology and, according to a Nasdaq report, is “leading the way” forward in this expanding market. From self-driving tech, to robotics, to medical advancements in AI, NVIDIA is poised to and expected to be an industry leader for now and into the foreseeable future!
Outside of AI, NVDA has been involved in blockchain technologies (the tech behind crypto currencies). While there is a lot of uncertainty in the crypto currency markets, blockchain technology is expected to be around for a very long time. This technology will be exploited and used outside of the crypto but it is still very much in the developmental phase and it is TBD on how it will be incorporated into daily life.
From a numbers perspective, NVIDIA has been on a tear and is up nearly 1000% since the start of 2016…sorry I don’t have a time machine to post this article two years ago :(. Looking forward though, NVIDIA has a bright future and some of that is already baked into the stock’s current price which trades at a price-to-earnings (P/E) ratio of just over 40. While that is roughly double the stock market average, it isn’t terrible for a company with the growth perspectives of NVDA…but it does mean that a disappointing quarter could drive down NVDA stock in the near-term.
NVDA is a large cap stock with a market cap of just over $140B (this is a big a$$ company). However, unlike a lot of large cap stocks whose years of tremendous growth are behind them, I believe that NVIDIA’s growth is just getting started. I feel that everything in NVIDIA’s past and present point to a bright future and makes this a stock that you can add to your portfolio for the next 20-30 years! The difficulty with a high-flyer like this is finding a nice entry point and I think this recent 10% dip is that opportunity. I have owned this stock since mid-2016 and I’m adding to my position next week…I hope you will give NVDA a look as well.
If owning individual stocks isn’t your thing, check out the Semiconductors ETF (SOXX), which was my Jan ETF O’ The Month. Within this ETF, NVDA is the second largest holding, just behind Intel, and is has a weighting of just over 8%. Sector ETF, like SOXX, give you the opportunity to invest in specific business sectors without having to pick individual companies from that sector.
Before purchasing any stocks or ETFs, you should do your own research and consult a financial professional because, disclaimer, I’m not a paid finance professional. You can research stocks like NVDA and ETFs like SOXX for free on websites like Seeking Alpha and MarketWatch among other free online sources. Check out how my previous picks have done if you’d like. You can look forward to another stock pick in the coming weeks!
Market opens in 20 min! Holler at your boy with questions! See ya! ‘Merica!
