$NVDA is a gaming company. It has been since its inception. Most recently, Nvidia has been big into Artificial intelligence. Most headlines reference something to do with AI. I think this transition from gaming to AI is important for Nvidia's growth in the next decade. My price target for them is a 40% upside, $329. Is that even possible given how much it's grown this past year? I think so.
I'm just going to go over some catalysts and some risks:
Catalysts
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New GeForce series using the new Volta architecture, Series 20. Announcement will be big, should be in March 2018. The already released GPUs with Volta have been successful, I expect that trend to continue.
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Cryptocurrency becoming more popular. Crypto isn't going away, so I'd assume it to be a catalyst. I don't like to pay attention to it.
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Two years until we are seeing some of Nvidia's big autonmous vehicles come to life. Both the driving platform they are developing in china with ZF and Baidu, and the Volkswagen VW AI-infused Bus are expected to be actualized in 2020. If we see some success in the execution of these projects, I'd consider it a catalyst. I'm confident their execution will be successful given the success they've already demonstrated in AI with their datacenter revenue.
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Gaming industry big news (PC). Every year there is more gamers, every year gamers get better jobs, every year there are more games. GPUs are an integral part to gaming, so these revenues will grow with the gaming market.
Risks:
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Semiconductor industry decline. The semiconductor industry is interesting because a decline in one can cause they others to underperform. This is an entire topic on its own.
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AMD/new GPU designer taking market share from Nvidia. Unlikely, but Nvidia's dominance in the GPU market is why I am so bullish. I want to invest in the leader of AI deep learning training hardware and graphics processing, not the second best.
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Jensen Huang, the CEO, losing his ability to lead the company. Nvidia has has successfully positioned themselves to be a part of the future of AI, which I think is accredited to Huang's execution. This is a positive, he's invested in the company. The downside to this is that he is very important and anything that hurts his ability to lead would hurt Nvidia.
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New GeForce 20 series being not much of an upgrade from series 10, possibility but I think unlikely. Unlikely because their Titan V uses 12nm technology.
Price Target:
- I used a DCF model to arrive at the price target of $329, using a 7% discount rate and 1% perpetual growth rate. In the model I assume 39% revenue growth in Nvidia's 2019 fiscal year, 32% in 2020, and 28% in 2021. I based this off their plans in autonomous driving, and their new GeForce series to be released with Volta architecture.
What I think:
I think Nvidia successfully integrating its hardware into so many big company's is a huge success for their long term goals. Nvidia hardware is being utilized in Tesla's electic car's autopilot 2.0, and used by Google and Amazon Web Services datacenters. Nvidia is so dominant that no one can take these positions unless the company wants to build their own chips, which would be billions of dollars in R&D. Nvidia is supplying hardware for these big companies and there is no one to compete.
TLDR: NVIDIA is investing into AI. Nvidia's Drive PX 2 operates Tesla's autopilot 2.0 system, Nvidia's new Tesla GPUs have grown datacenter revenue by 133% this last year, and their focus on the narrow AI to bring autonomous vehicles on the road is proving to be worth it. $329, long equity.
Why am I doing this?
Well I don't think I am perfect and I think I missed A LOT, so I want some critisism to get as close to perfection as I can. Read the paper and look at the model.
Submitted March 05, 2018 at 02:28PM by Noqt http://ift.tt/2I6Vw5M
