NVIDIA stock: How the NVIDIA boss is steering the semiconductor leader to new heights

by Florian Hielscher, Euro on Sunday

In the presentation at the most recent annual general meeting, Jensen Huang, head of the chip giant NVIDIA, quoted a quote from the business portal Yahoo Finance: “NVIDIA is no longer just a semiconductor company. NVIDIA is a platform.” In fact, the Americans now offer much more than chips. The core business with graphics chips for gaming delivered record sales in the first quarter. However, sales in automotive technology and robotics declined.

In addition, however, other drivers are growing. At 622 million dollars, professional visualization still contributes a manageable part to the total turnover. But the area has it all: Platform solutions in the graphics area, the “Omniverse”, which includes 3D designs or digital twins, i.e. computer simulations of real processes, are promising. NVIDIA is collaborating with Amazon Robotics to use simulation to optimize the design of warehouses and intelligent robots. There is also a lot of potential in the data center business. More and more companies are relying on the cloud, and the need for high-performance hardware and software is growing. NVIDIA’s revenue in the segment jumped 83 percent to $3.75 billion in the first quarter.

Given the prospects, the CEO was confident at the shareholders’ summit: “Our new chips and systems will significantly advance AI, graphics, Omniverse, self-driving cars and robotics, as well as the many industries that these technologies will impact,” said Jensen Huang. Not everything went smoothly in the first quarter. Despite significant growth in sales, net income fell 15 percent from the prior-year quarter to $1.62 billion. However, $2.1 billion flowed back to shareholders in the first quarter via share buybacks and cash dividends. NVIDIA announced the extension of the buyback program and may acquire additional common stock for up to $15 billion through December 2023.

Enormous opportunities

Growth should bring new markets and the combination of software, system and chips. Beginning this year, NVIDIA will also offer software licensing and support models to businesses. For the second quarter, the Americans expect sales of 8.1 billion dollars. This includes an expected decline in sales due to the war in Ukraine and the pandemic in China, which is putting a heavy strain on supply chains. NVIDIA puts possible sales losses at around 500 million dollars.

In the longer term, the technology giant sees itself prepared to penetrate many markets. It is structured like no other tech company, and open platforms allow you to work with a wide variety of companies. Chief Huang thinks big: “Excellent computing and artificial intelligence enable us to revolutionize industries worth a hundred trillion dollars.”

Outlook: Given the prospects, the valuation is favourable. This makes the share interesting for long-term investors.

Notice of Conflicts of Interest:The majority owner of the sole shareholder of Finanzen Verlag GmbH, Mr. Bernd Frtsch, has taken direct and indirect positions on the following financial instruments mentioned in the publication or related derivatives that may benefit from any price development resulting from the publication: NVIDIA.


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