5 min read

Nvidia (NVDA) - trade idea

Sector: Computer And Technology / Industry: Semiconductor - General
Nvidia (NVDA) - trade idea

Direction : LONG

Introduction

My thesis starts by looking at the ever-growing gaming industry and also looking at the crypto mining industry demanding graphics cards.

Nvidia is a leader in the semiconductor industry, they have done very bold calculated moves over the years. It seems that they keep the innovation fire alive, unlike Intel where the innovation fire it’s struggling to stay alive.

1.Gaming industry

We've all seen how much success the gaming industry has had in light of the COVID-19 pandemic.

Due to their increased time at home, gamers have had the opportunity to download and purchase new games and consoles, and so much more.

The gaming industry outperformed both movies and sports combined last year as the biggest moneymaker in entertainment. In fact, on a global scale, the gaming industry was valued at $162.32 billion in 2020. Based on the current growth rate, it’s expected to reach a value of almost $300 billion over the next five years.

Each region of the world showcases different aspects of gaming’s success, with each contributing to overall global growth for the gaming industry.

2.Crypto industry

Another space that it’s growing it’s crypto. In order for a crypto project to work it needs miners to mine the crypto coins. A miner needs either a GPU (graphics processing unit) or an application-specific integrated circuit (ASIC) in order to set up a mining rig. Nvidia GPUs are used in a large part today to mine Ethereum.

Ethereum will change its mechanism of mining from proof of work (PoW) to proof of stake (PoS). This change will have some impact on NVDA, but I do not think it will be significant. The expected change in the mining mechanism is set to be in Q1 2022.

3.Arm-based processors

Apple showed the power and efficiency of arm-based processors.

Now Nvidia enters into the race after they acquire Arm for $40 billion.

In my opinion Nvidia it’s placed perfectly to take advantage of the digital acceleration.

Financial Highlights

As you can see the numbers are very very strong.

  • Gross margin. ✓
  • Ebita margin. ✓
  • Net income margin. ✓
  • CFO growth. ✓

The company is in full growth mode.


NVIDIA Corporation - Q1 2022 Earnings Call

Now let’s look deeper, let’s see what are they have to say.

Let me talk about our business results and the work that we're doing to create the future. We had an outstanding year. I couldn't be prouder of the NVIDIA team. Full year revenue was a record $16.68 billion, up 53% from $10.92 billion a year earlier. Our gaming and data center businesses each achieved record revenues this year. GAAP earnings per diluted share were a record $6.90, up 53% from $4.52 a year earlier. We returned $395 million during the year to shareholders through quarterly cash dividends. These results capped decades of innovation investment in our singular approach to computing.
Our data center business had a breakout year. NVIDIA is now a data center-scale company, optimizing 3 fundamental processors to address the new workloads of cloud computing and AI, the CPU for general-purpose computing, the GPU for accelerated computing and the DPU for data processing of the data center infrastructure. NVIDIA Pioneer GPU computing, the engine of AI and HPC. Building on Mellanox's world-class networking, we're pioneering the NVIDIA BlueField DPU, an accelerated computing platform for the infrastructure of the data center. This will significantly expand our total addressable market opportunity in the coming years as we expect every server will one day ship with a DPU in addition to a CPU and GPU.
As just weeks ago, we shared our plans for Grace, NVIDIA's first data center CPU, a ARM-based processor that will deliver 10x the performance of today's fastest servers on the most complex AI and high-performance computing workloads. DPUs are an exciting new growth opportunity for NVIDIA, and we can't wait to share our progress. In September, we announced an agreement to acquire Arm for $40 billion. Arm is the world's most popular CPU. With NVIDIA's AI capabilities, we can enhance Arm's offerings in mobile and embedded, and build a thriving ecosystem and advanced computing from the cloud, smartphones, PCs, self-driving cars, robotics and edge IoT. And together, we have the opportunity to provide greater choice in the data center ecosystem. The approval process is proceeding, and we're confident that regulators will see the benefits of the entire ecosystem.
One of the most profound impact of AI is in transportation. AI is revolutionizing autonomous machines, such as self-driving cars or robots. The computation required is enormous. The software is complex and safety and security are vital. For robotics, our platform is NVIDIA Isaac. For self-driving cars, we have NVIDIA Drive. Drive is an end-to-end platform for autonomous vehicles. It brings together our powerful AV chips and computers, sensor architecture, data processing, mapping, software development, simulation, point orchestration and road testing.
This year, we announced that Mercedes has chosen NVIDIA to build the world's most advanced cars. Starting in 2024, the entire Mercedes-Benz fleet will be powered by NVIDIA DRIVE. DRIVE has won $8 billion of revenue pipeline through FY '27 in transportation, including auto brands, trucking companies, next-generation electric vehicles and robotaxis. This has been a truly transformative year. For NVIDIA, we were fortunate that it was a year of new inventions, excellent business performance and successful acquisition and accelerating growth. From just 3 of us in Curtis' townhouse, NVIDIA is now 20,000 families in more than 25 countries around the world. And through that great expansion of our business and despite the hardships we faced -- we all faced this year, NVIDIA has stood up to the principles we've shared since our founding. We do hard and impactful work that creates a better future.

As we look ahead to our future fundamentally reshaped by this year, NVIDIA's role in computing, science and industry has never been more important. I want to thank all in the NVIDIA family for doing impactful work, caring for others and turning these challenging times into one of our finest hours.

As we can see, they have a very strong earning report and also a very bullish forecast.

Because the covid situation accelerates the adoption and improvement in digital systems, NVDA is situated at the cutting edge of technology and will take advantage of this situation.

The chart image is for visualization purposes. Is not for timing the entry/exit positions

Probably it’s an obvious trading idea, but keep in mind we are in a game of making a profit, not in a game of finding the most obscure company with a secret plan to change the world.

Stay well

Additional sources:

https://www.investopedia.com/tech/how-does-bitcoin-mining-work/