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NVDA Stock Forecast and Analysis: 3 opportunities and 2 risks

What are the 3 opportunities and 2 risks for NVIDIA? How to invest in NVIDIA stock? NVIDIA(NVDA) stock buy or sell?

NVIDIA Stock Forecast and Analysis 2021

First, because in the third quarter of 2020, NVIDIA's revenue and profit have set record highs. Among them, revenue was 4.73 billion U.S. dollars, an increase of 57% year-on-year, and analysts expected it to be 4.41 billion U.S. dollars.

NVIDIA's revenue
NVIDIA's revenue

Earnings per share were 2.91 US dollars, analysts expected to be 2.57 US dollars. It can be seen that both revenue and profit have exceeded analysts’ expectations.

NVIDIA expects its fourth-quarter revenue to be US$4.8 billion, in line with analysts’ expectations of US$4.42 billion.

Second, the current market value of NVIDIA is much higher than the combined market value of Intel and AMD.

From the beginning of the year to now, NVIDIA has risen by 123%, AMD has risen by 87%, Intel has fallen by 24%, TSMC has risen by 64%, and the Nasdaq has risen by 33%.

It can be seen that both in chip stocks and technology stocks, NVIDIA has risen rapidly

Does NVIDIA have room for growth? This is the question that every investor thinks about every day

For NVIDIA, a high-tech company with high growth, high valuation, high risk, and high return, pure analysis of financial indicators is no longer valid.

If NVIDIA cannot continue to grow in the future, it cannot maintain its current high valuation.

As investors, we must capture the possible future opportunities and risks from the macro perspective of the entire chip industry ecosystem and technological development.

Today we will focus on the events and developments of the chip industry in the past six months, talk about the three opportunities for NVIDIA, and focus on two potential risks.

target value
Nvidia stock target value

Let’s talk about the three major opportunities for NVIDIA’s future development.

Opportunity 1: The epidemic caused people to stay at home, and unexpectedly caused explosive growth in the game industry.

In 2020, the global video game market is expected to reach 159 billion U.S. dollars, which is about 4 times the movie box office revenue and 3 times the music industry revenue.

Games have very high requirements for computer graphics cards. The development of the game industry has stimulated a surge in graphics card sales. NVIDIA currently has 70% of the GPU market.

It is foreseeable that the improvement of the epidemic will not happen overnight. If the epidemic persists for a long time, the game industry will continue to benefit, and NVIDIA will also benefit in the long term.

Opportunity 2: With the explosion of artificial intelligence, NVIDIA with GPU technology has greatly benefited.

At present, the main application areas of artificial intelligence include fingerprint recognition, speech recognition, image recognition, video recognition, deep learning, intelligent robots, etc.

GPU is more suitable for artificial intelligence than traditional CPU because GPU is more suitable for matrix operation, the neural network is designed for a large number of matrix operations, so it is better to use GPU than CPU

Opportunity 3: GPU is promising in the future for autonomous driving technology. 

Computing power is the key to autonomous driving, including the processing, fusion, and calculation of perceptual information.

At the same time, decision-making is deep learning. NVIDIA’s GPU is by nature the best choice for autonomous driving computing platforms.

In summary, games, artificial intelligence, and autonomous driving are all industries with great growth potential in the future, and NVIDIA's GPUs have incomparable technical advantages in these industries.

These are the driving forces that have driven NVIDIA to catch up with Intel in the past few years. I firmly believe that it will continue in the future.

Ordinary people always think that the risk NVIDIA faces is the competition between Intel and AMD. NVIDIA’s biggest risk does not peer competition, but the changes and adjustments of the entire chip industry ecosystem.

These are the most difficult risks for NVIDIA to resist.

The 2 risks faced by NVIDIA are:

Risk 1: Apple started to use self-developed laptop SOC (system chip), which may become a trend,

Apple’s just-released M1 chip is Apple’s first self-developed ARM architecture processor for Mac. The first devices using this processor include MacBook Air, 13-inch MacBook Pro, and Mac mini.

Not only the CPU, but the GPU is also integrated,

Apple’s self-developed notebook computer chips are not only hitting Intel, but NVIDIA and AMD are also hit hard.

If Apple’s market share in notebook computers is greatly increased due to the success of self-developed chips, it will squeeze NVIDIA’s GPU market share in notebook computers.

Risk 2: In data centers, undeveloped chips will become more and more common.

Two years ago, Amazon has launched the first self-developed Arm architecture cloud server CPU-Graviton, and the first cloud AI inference chip AWS-Inferential, trying to take its path of cloud core integration

Huawei has also accelerated the pace of self-developed data center chips. Huawei’s TaiShan servers, including Kunpeng 920 and Shengteng 310, are bringing high-performance computing into every data center.

And Microsoft is trying to make FPGA and CPU work together to replace GPU,

Because FPGA has pipeline parallelism and data parallelism at the same time, while GPU has almost only data parallelism,

As early as 2016, at the Google I/O Developer Conference, Google officially released the first generation of TPU. Up to now, Google’s self-developed artificial intelligence chip TPU has been iterated to the third generation.

Since 2017, Alibaba has successively invested in Cambrian and acquired Zhongtianwei.

nvidia stock price
Nvidia stock price

Why will self-developed chips for data centers become a major trend?

Because of the great development of the public clouds, these public cloud operators have an increasing market share. They have their technical strength from researching their chips and developing their software, rather than relying on traditional chip manufacturers.

Therefore, the more cloud computing develops, the more obvious the trend of self-made chips in the data center in the future. This is not a good sign for traditional chip design companies such as Intel, AMD, and NVIDIA.

From a macro perspective, we analyzed 3 big opportunities and 2 potential risks for NVIDIA.

These three big opportunities have opened upmarket development space. NVIDIA, which has the absolute advantage of GPU technology, will still have a lot of room for growth in the next few years. It is believed that the stock price will also rise.

At the same time, these two risks must not be ignored. The chip industry is changing rapidly, especially when these two risks are driven by major companies such as Apple, Amazon, Microsoft, and Alibaba.

Some of them are large customers that NVIDIA depends on. They have the resources to create and change the landscape of an industry. Today I will not analyze the short-term trend of NVIDIA stock.

As investors, when conducting NVIDIA Stock Forecast and Analysis, we must pay attention to these major trends to make the right investment decisions for NVIDIA at the right time.

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