Cash in On Video Games with NVIDIA — Data Driven Investor
Value investors can cash in on video games with NVIDIA Corp (NASDAQ: NVDA). In fact, NVIDIA allows gamers to take advantage of a classic value investing strategy. The strategy is to buy the companies that manufacture the components or infrastructure business needs to function and grow. NVIDIA is a value investment because it manufacturers the graphics cards, and graphics processor units (GPUs) games run on it.
Consequently, NVIDIA investors make money no matter what game is hot. Thus, it does not matter if Apex Legends attracts more players than Fortnite. To explain, both Fortnite and Apex Legends players need a console or computer to play the game on.
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NVIDIA makes both gaming processors and the graphics cards games like Fortnite run on. Not surprisingly, NVIDIA is positioning itself to cash in on the multiplayer gaming craze. For example, NVIDIA is expanding its line of G-Sync Compatible monitors by 41%, PCWorld reports. In addition, NVIDIA sells the popular GeoForce RTX 2060 graphics card with Turing architecture.
How Fortnite Boosts NVIDIA
Therefore, NIVIDIA makes money whenever a popular game like Fortnite obsesses players. Moreover, NVIDIA’s potential market expands each time a mega-hit game takes the world by storm.
For example, there were 250 million Fortnite players in the world in March 2019, Games Radar estimates. In addition, 50 million people were playing Apex Legends in March 2019. Thus, just two games have 300 million players.
Astonishingly, Apex Legends only premiered in February 2019 and Fortnite is just two years old. Hence, the video game market is capable of sudden growth and instant disruption.
Under these circumstances, games makers like Electronic Arts (NASDAQ: EA) are unstable and potentially unreliable. However, NVIDIA is a stable and reliable company that manufactures key components gamers need.
NVIDIA is a reliable dividend stock
Unlike Electronic Arts; Apex Legends’ creator, NVIDIA stock pays a dividend. Moreover, NVIDIA’s dividend has grown for the past six years.
In fact, NVIDIA’s dividend more than doubled over the course of six years. Dividend.com reports, NVIDIA started paying a 7.5₵ dividend in December 2012.
Additionally, NVIDIA’s dividend has increased by around 1₵ a year since 2012. For example, NVIDIA shares paid a 16₵ dividend on 22 March 2019, up from 15₵ on 21 September 2018.
Under these circumstances, NVIDIA offered a dividend yield of 0.34%, an annualized payout of 64₵, and a payout ratio of 9% on 18 April 2019. Thus, NVIDIA is a growing dividend stock that profits from video games.
How Much Money is NVIDIA Making?
Currently, NVIDIA is generating a lot of cash from its business. For instance, NVIDIA reports an operating cash flow of $898 million and an investing cash flow of $40 million for 1 stQuarter 2019.
Plus, NVIDIA records a free cash flow of $695 million in 1 stQuarter 2019. Impressively, NVIDIA’s free cash flow grew from $337 million in 4 thQuarter 2018 to $695 million in 1 stQuarter 2019. Additionally, NVIDIA’s operating cash flow grew from $487 million in 4 thQuarter 2018 to $898 million four months later.
Consequently, NVIDIA had $6.64 billion in short-term investments and $782 million in cash and equivalents on 27 January 2019. Therefore, NVIDIA had $7.422 billion in cash and short-term investments on 27 January 2019.
Hence, NVIDIA has a lot of money to pay dividends with. Yet, NVIDIA is both a growth stock and a dividend stock.
NVIDIA is a Growth Stock
Moreover, NVIDIA (NASDAQ: NVDA) has experienced incredible growth in the past few years.
For example, NVIDIA shares were trading at $22.20 on 17 April 2015 and $187.29 on 18 April 2019. Hence, NVIDIA share value grew almost eightfold in just four years.
However, NVIDIA’s shares reached a $292.76 high in the past year. Thus, NVIDIA is stock with a fluctuating price that pays a dividend. Hence, you can short NVIDIA or use it as a dividend stock.
In the final analysis, NVIDIA could be one of the most versatile stocks around. It is also one of the fastest growing stocks in existence.
NVIDIA is Far More than Games
For example, NVIDIA’s current product lines include; Autonomous Machines, Data Center, Deep Learning & Artificial Intelligence ( AI), Design and Professional Visualization, Healthcare, High-Performance Computing, Self-Driving Cards, and Gaming & Entertainment. Thus gaming is only a small part of what NVIDIA does.
Moreover, I think NVIDIA’s work on autonomous machines could be even more lucrative than games. For example, the autonomous machines include AI for robotics with NVIDIA’s Isaac SDK (software development kit). The Isaac SDK is a toolbox of high-speed apps for bots.
How NVIDIA is cashing in on Autonomous Machines
The Isaac SDK is at the center of NVIDIA’s Jetson platform for robot operations and autonomous machines.
Notably, there are many potential uses for the Jetson platform in many fields. For example, the giant American grocer Kroger (NYSE: KR) and the Ocado Group PLC (LON: OCDO) are building fulfillment centers where hundreds of robots pull and packaged groceries.
Each of those robots will need an operating system and a processor and NVIDIA can provide them. Moreover, NVIDIA is developing an autonomous delivery and logistics robot called Carter. NVIDIA’s Jetson AGX Xavier robotics platforms powers Carter robots the Isaac SDK and Jetson operate. In addition, NVIDIA offers a cheaper and smaller robot it calls Kaya.
The Demand for Autonomous Machines could explode in the coming years
The uses for NVIDIA powered robots and autonomous machines extend far beyond fulfillment centers. For instance, robots are replacing the human oil-field workers Americans call roughnecks, The Denver Post reports.
In fact, robots replaced five out of seven roughnecks on American oil rigs in two years, Futurism’s Scott Santens writes. To elaborate, in 2015 there were 700 roughnecks working on 195 US oil drilling rigs. However, in 2017, only 177 roughnecks were working on 192 rigs.
Thus, new uses for autonomous machines; like the Jetson Nano, can appear quickly and disrupt entire industries. Consequently, the demand for NVIDIA’s autonomous machines could explode in the coming years.
Another Opportunity for NVIDIA
For instance, the American company Aitheon is trying to build a digital ecosystem which could make the widespread use of autonomous machines easy.
Uniquely, Aitheon has demonstrated self-driving cars, robots, and robot bartenders, humans and AIs can operate by remote control. Moreover, Aitheon is planning autonomous stores and industrial robots that humans can operate from a long distance.
If it works, Aitheon’s system will increase the demand for robots and autonomous machines by allowing companies to deploy them without direct human supervision. Instead, human operators or AI will run the robots by remote control using a blockchain.
For instance, a person in Ohio could operate a Jetson Nano robot at a warehouse in Hawaii or a mine in the Arctic. In detail, the human operator will use Aitheon’s ecosystem to connect to the robot and operate it.
The operation will resemble how human military personnel operates the drones the US military deploys on battlefields. To explain, human operators in Nevada control drones in the Middle East, Africa, and Afghanistan. Importantly, Aitheon is trying to build a blockchain marketplace where autonomous machine operators can sell their services.
NVIDIA and Autonomous Vehicles
Moreover, NVIDIA is a leader in self-driving vehicles with its NVIDIA DRIVE operating system. Importantly, large automakers like Tata Motors (NYSE: TTM), owner of Jaguar and Land Rover, and Toyota (NYSE: TM) are using NVIDIA DRIVE.
Thus, NVIDIA is a great investment for autonomous vehicles because it takes none of the risks of manufacturing, or deploying the cars. Instead, companies like Tata, Tesla, and Toyota build and deploy cars. NVIDIA makes money by selling the brains the vehicles need to operate.
Hence, NVIDIA can make money from autonomous vehicles no matter the company dominates that coming business. Notably, there is already a market for autonomous vehicles. For example, the Alphabet (NASDAQ: GOOG) subsidy Waymo is purchasing 62,000 minivans from Fiat-Chrysler (NYSE: FCAU) for its rideshare experiments.
Therefore, any automaker or company experimenting with autonomous vehicles is a potential NVIDIA customer. The potential market for solutions like DRIVE will grow because companies are only scratching the surface of the autonomous vehicle market.
Obviously, autonomous and remote-operated heavy equipment will be a big market for NVIDIA soon. In fact, I think there will be a big demand for autonomous tractors, construction machines, excavators, forklifts, cranes, mining machines, and other heavy equipment soon. NVIDIA can cash in on that market by adapting DRIVE for heavy equipment.
NVIDIA’s Amazing Growth Potential
Uniquely, the applications I mention here are a small sampling of the hardware solutions NVIDIA is developing.
Beyond autonomous machines, I think there will be huge markets for NVIDIA’s Deep Learning, Professional Graphics, and Healthcare Solutions. For instance, scientists are using NVIDIA’s Deep Learning for everything from reducing restaurant waste to searching the stars for alien life.
Meanwhile, architects, game developers, movie producers, doctors, scientists, TV producers, urban planners, military strategists, inventors, artists, and engineers use NVIDIA Professional Graphics. To explain, engineers use the same NVIDIA technology developers make games to design new machines.
In the final analysis, NVIDIA’s technology has potential applications in almost any industry. Therefore, NVIDIA is one of the best growth, dividend, and value stocks for the 21 stCentury.
Daniel G. Jennings has been a professional writer for over two decades. He has written extensively on business, technology, economics, finance, financial technology, banking, investment, market, stock market, political, philosophical, historical, and other subjects. Jennings’ favorite subjects include; retail, cryptocurrency, crypto-assets, blockchain, the stock market, international politics, history, and American politics. In addition, Jennings has written hundreds of freelance articles and blog posts for an incredible variety of clients. Jennings currently writes most of the content for the Market Mad House blog, which he maintains. Jennings has a bachelor’s degree in history and an MBA. Jennings lives and works in Colorado, USA. Besides writing Jennings has worked as a journalist, an editor, an accounts-payable-professional, and at many part-time jobs.
Originally published at https://www.datadriveninvestor.com on April 23, 2019.