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Bull Of The Day: NVIDIA (NVDA)

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NVIDIA (NVDA - Free Report) , the largest and fast-growing semiconductor innovator in the US, has been a stock market star in recent years, skyrocketing over 500% in the past 3 years alone (despite its recent decline) as this GPU pioneer and its visionary leader, Jensen Huang, take the prolifically advancing chip sector by storm.

NVDA has experienced this infectious sell-down that so many other richly valued innovators have experienced, sliding into bear market territory (20% or more decline from recent highs) in mid-December and has yet to recover. However, this is a stock that is being bought up on every single dip due to its ostensibly boundless growth outlook (driven by its capabilities in the development of AI) providing endless support.

NVIDIA is the most exciting chipmaker on the public exchanges today, producing chips with unmatchable speed and capabilities that place it at the forefront of next-generation technologies like AI development, data analytics, and even the ambiguous metaverse.

NVIDIA's recent growth is nothing short of incredible as the enterprise sets the bar for prolific innovation in the chip space, and no other business has been even close to keeping up. NVIDIA's intelligence driving chips have solidified their sole GPU market control as we enter a digital renaissance.

The pandemic drove the global economy to digitalize by 10 years in just 10 months, pulling forward unprecedented demand for NVIDIA's hyper-fast GPUs. Society is now conditioned for swift and continuous adaptation to advancing tech, supporting NVIDIA's boundless profitable growth with endless innovation at the core.

Analysts are relentlessly bullish on NVDA as the company consistently blows out estimates each quarter. Sell-side analysts have been pushing up their EPS projections over every time horizon, propelling NVDA into a Zacks Rank #1 (Strong Buy) as of this writing.

NVDA exposure is a must for every portfolio's next-generation allocation as the 4th Industrial Revolution kicks off.

Fundamental & Technical Breakdown

This GPU powerhouse has been able to justify its exceptionally rich 60x P/E multiple with consistently outsized profitable growth that has driven between 40-70% year-over-year revenue appreciation in the past 8 consecutive quarters (flowing down to high-double to triple-digit annual earnings expansions), along with record top and bottom-line results in 6 back-to-back earnings reports.

NVIDIA has proven its ability to generate boundless secular growth that has blown past analysts' increasingly aggressive top and bottom-line estimates for years. EPS estimates have been raised across the board after an incredible October quarter, and I still view projection as conservative. NVIDIA's most significant profit drivers in gaming and data centers are still just in their nascent phases of development as we enter this digital renaissance.

I expect demand for NVIDIA's GPU technology to only accelerate over the next decade as this company paves the way for innovation across sectors.

NVDA is a stock that you can't afford to leave out of your portfolio, and after its recent pullback that resulted in a strong bullish bounce off a previous resistance level at $200 a share (prior resistance makes the best support levels), it'd be prudent to seize on this excellent entry point below $300 a share. 

The Business

NVIDIA has become the most cutting-edge chipmaker on earth. The company invented the graphics processing unit (GPU), initially purposed for rendering images, but now possesses capabilities beyond graphics cards. NVIDIA's hyper-fast GPUs are becoming a necessity in data centers across the globe, most notably in the development of deep learning and artificial intelligence (as I mentioned above). 

Data centers will be a primary end-market for this market disruptor in this world headed towards cloud computing, and NVIDIA's hyper-fast GPUs are becoming a necessity. CEO and founder Jensen Huang said in a recent press release that "NVIDIA AI is enabling breakthroughs in language understanding, conversational AI and recommendation engines the core algorithms that power the internet today. And new NVIDIA computing applications in 5G, genomics, robotics, and autonomous vehicles enable us to continue important work that has great impact." 

NVIDIA completely controls the data center GPU market with no close competitors (despite AMD's attempts). This company is crucial to the discovery of true AI, which will be an inflection point in human understanding. NVDA chips can already be found in 8 of the top 10 supercomputers and 2/3rd of the top 500. 

Nvidia is also leveraging 5G with its anticipated cloud gaming platform. Just as cloud computing is the future of business data and analytics, cloud gaming is the future of gaming. NVIDIA is making a big bet in this field with its expanding cloud offerings such as its advanced cloud-based computing, CUDA and GeForce NOW for the ultimate remote gaming experience. These platforms allow anyone to utilize NVIDIA GPUs' high-speed, low-latency technology without needing NVIDIA's hardware locally, using any digital device from a smartphone to a VR headset. 

Final Thoughts

NVIDIA is a stock that every investor should have some exposure to. Despite its recent drawdown, the NVDA remains at a very frothy (yet justified) market valuation, after more than doubling in the past year, leaving the stock more vulnerable to short-term volatility as monetary tightening initiates. 

Still, NVDA is currently trading nearly materially below its consensus 12-month price target and roughly 50% below its most optimistic target. Twenty-three out of 26 analysts call it a buy today (with no sell ratings), and I couldn't agree more. 

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