Not only is it well positioned to benefit from video game industry growth, but its products have applications that span many different markets.
Every week on Motley Fool Backstage Pass, there’s a program called “The Gaming Show” where Fool contributors and analysts discuss what’s happening in the video game industry. In a recent episode, the team decided to rank 10 video game stocks and semiconductor company Nvidia (NASDAQ:NVDA) took second place.
In this clip from that episode, recorded on Jan. 10, Fool contributor Jose Najarro explains to fellow contributor Jon Quast the various things that make Nvidia a great video game stock.
Jon Quast: This one, Sanmeet and Jose ranked as their No. 1 but coming in collectively as No. 2, Nvidia, and Jose’s talking about that here.
Jose Najarro: I’m shocked that it didn’t make it to number one, if I may be honest. We can see Nvidia. Right now, current markets in the gaming. They create graphics cards. These graphics cards are used for numerous markets, gaming, datacenter, autonomous driving, numerous automation systems, artificial intelligence, and machine learning. Within the gaming industry, and since this is a gaming show, I’ll focus on those markets.
It creates the graphics cards for gaming. They are also one of the leaders in gaming laptops. They work with plenty of OEMs to create laptops. They also work with numerous OEMs to create high-performing gaming monitors. The final thing, they also have a Shield TV. For those not familiar with Shield TV, it’s like a beefed-up version of Roku‘s hardware or [Alphabet‘s] Google’s streaming TV, which has a little bit more applications behind it. I personally own a Shield TV and I can connect it to my TV and make it pretty much a high-speed gaming computer for a few $100. It’s pretty cool, the products that they have. Financially, we can see a trailing 12 months revenue, $24 billion net income. Unfortunately, they didn’t put that there. Free cash flow though, $7.15, plenty of cash compared to debt.
Where I see the future growth for this company is one, Nvidia’s graphics cards. They continue to develop every single year. As the overall graphics of gaming becomes better, I’m pretty sure if you look at games now compared to how they looked 10 years ago, you’ll be surprised at the dramatic change. That’s going to continue, especially with the demand from graphics, with virtual reality and augmented reality.
I want to hit the second topic last, but next is the high demands of laptops. Right now, with this hybrid style, we have content creators, a lot of people just working from home. The demand of high-performing laptops, which Nvidia focuses on, continues to increase.
Finally, is their GeForce NOW gaming, which is their cloud gaming. They are partnering up with numerous of OEMs in just the TV market. For example, I believe Samsung, this upcoming year of June 2022, during the summer, they are going to be releasing TVs that will be compatible with GeForce NOW. Now, your smart TV will be able to play AAA games for a monthly subscription. I think that’s insane.
For me, I can talk about Nvidia for hours, but we should move on to the next company.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Jon Quast owns Roku. Jose Najarro owns Alphabet (C shares), Nvidia, and Roku. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Nvidia, and Roku. The Motley Fool has a disclosure policy.
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