NVIDIA (NASDAQ: NVDA) It won the broader market in 2020, providing big gains for investors thanks to the growing interest in video games and the growing demand for data center equipment.
These impressive gains may lead you to wonder if it is still worth keeping and if it can repeat its performance in 2021. The short answer to these questions is yes, as the catalysts that drive NVIDIA’s growth in 2020 are ready to expand in the new year. Let’s see how.
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NVIDIA’s Biggest Deals Will Get Better
The coronavirus pandemic failed to shake NVIDIA’s joy train as it saw an increase in demand for its graphics cards that are used in various applications, including PC games and data centers.
In the first nine months of fiscal 2021 (ending October 25, 2020), NVIDIA revenue increased almost 50% over the previous year to $ 11.67 billion, while net revenue jumped close to 55 % to US $ 2.87 billion. This is an impressive performance in a pandemic year and there are two specific growth drivers to be credited for it.
First, NVIDIA’s gaming business is in great shape throughout the year. Sales of graphics processing units (GPUs) remained strong, as people stayed at home during the health crisis investing in video game hardware to keep themselves entertained. As it turned out, the healthy demand for video cards and the lack of components created a shortage of GPU that should last until the first quarter of 2021.
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This means that NVIDIA’s gaming business could benefit from the pent-up demand in 2021, especially considering that consumers are finding it difficult to get their hands on the company’s newly launched cards. NVIDIA’s Ampere-based RTX 30 series cards are a huge improvement over their predecessors, offering a huge leap in performance at attractive prices. It also made them the ideal choice for cryptocurrency miners who bought $ 175 million in cards in the previous quarter.
Unsurprisingly, NVIDIA says that demand for the new cards has exceeded supply. The good part is that the company is working to fill the supply gap. The company would have placed a second production order with Samsung for their RTX 30 series GPUs, as it seeks to increase the availability of its new cards. Ideally, such a move should help NVIDIA increase sales of its cards, as there is a huge installed base of players who currently use older video cards that may not be able to run the latest graphics-intensive games.
Thus, NVIDIA’s gaming revenue may continue to rise further in the new year. This would bode well for the company, as it obtained 48% of its total revenue in this segment in the last quarter.
Favorable end-market conditions are also seen in the data center business, which produced 40% of NVIDIA’s revenue in the last quarter. In fact, NVIDIA says it is witnessing a huge demand for its A100 GPUs from data center customers and it may be a few months before the chip maker can achieve it.
Again, this is not surprising, as several well-known cloud players lined up to buy the A100 chips when they launched. NVIDIA had promised that the A100 could offer significant performance gains when dealing with artificial intelligence, machine learning and high-performance computing workloads, and even brought a more powerful version of the card.
Tom’s Hardware estimates that the A100 GPU can cost around $ 15,000. This indicates that NVIDIA can generate a lot of money once it manages to improve its data center GPU supply chain.
What’s more, the data center GPU market has a lot of growth to offer. According to a third-party market research report, sales of GPUs that accelerate data center workloads can register a compound annual growth rate of 45.4% through 2025, reaching $ 16.4 billion in revenue . NVIDIA says it controls most of the supercomputer accelerator market – more than 90%. If so, your data center’s revenue could increase significantly over the past 12 months from $ 5.77 billion in the coming years.
Investors should limit themselves to stocks
NVIDIA dominates the markets in which it operates. As in the data center space, NVIDIA controls most of the discrete PC GPU market with 77% in the third quarter of 2020, according to Jon Peddie Research.
As a result, the company is well positioned to take advantage of the potential growth in the gaming and data center markets. That’s why NVIDIA is expected to have impressive revenue and revenue growth in the future, according to analyst estimates compiled by Yahoo! Finance, becoming a high-growth stock that investors should continue to hold (or even buy more) in the new year.