NVIDIA Corporation Stock History: Why It's Growing and What Could Slow It Down

By Markets Fool.com

Image source: Getty Images.

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NVIDIA's(NASDAQ: NVDA)stock run-up of 137% over the past 12 months has sparked immense interest in the company lately. But like many other companies, NVIDIA's stockhas had a series of rise and falls over its17-year history listed on the Nasdaq. To better understand the company and why it's experiencing big gains right now, let's take a look at what the company does and a brief analysis of whether or not the stock is a buy.

What NVIDIA does

NVIDIA's two primary business segments are its sales of graphics processors, called GPUs, and its Tegra processors. Between these two segments the company then splits out its revenue business into four key markets:

  • Gaming
  • Professional visualization
  • Data center
  • Automotive

Gaming is by far the company's most lucrative market, with company bringing in nearly 55% of its total revenue from gaming in fiscal Q2 2017. NVIDIA holds a dominant position in the gaming space, with its GPUs holding a 70% market share in discrete desktop GPU market share, leaving rival Advanced Micro Devices(NASDAQ: AMD) with just 30%.

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Take a look:

Data source: Jon Peddie Research.

After gaming, the company's professional visualization segment brings in the next highest amount of revenue, representing about 15% of total revenue in Q2 2017. NVIDIA is steadily improving sales in this business as well, andrevenue from professional visualization was up 22% year over year in Q2.

NVIDIA also supplies GPUs for automakersand its automotive segmentbrings in about 8% of the company's total revenue. NVIDIA is also a leader in the driverless car technology space with its Drive PX 2 supercomputer and its newly released Xavier system-on-a-chip (SoC). These technologies bring situational awareness to semi-autonomous cars by using NVIDIA's GPUs to process visual information.

And last but not least is NVIDIA's data center segment, which brought in about 6.8% of the company's total revenue in fiscal 2016. Butdata center revenue is growing quickly, and in Q2 2017, revenue improved nearly 110% year over year.

It's worth mentioning that NVIDIA also brings in revenue from its original equipment manufacturer and intellectual property segment, which consists of lower-priced graphics cards as well as royalty payments from Intel(NASDAQ: INTC). It's the only NVIDIA business that's on the decline right now, but it should continue to be offset by growth from the company's other businesses.

How NVIDIA stock has performed

Historically, NVIDIA's stock price has seen a few jumps and drops over the past few years, but the price is seeing historic highs lately:

Data by YCharts.

NVIDIA's recent gains have come from posting strong sales growth over the past few quarters, all while scoring more opportunities in new markets.Specifically, the prospects of virtual reality and driverless cars are likely fueling some of NVIDIA's stock gains lately.

The company's dominant position in the GPU gaming space should give the company a competitive advantage over Advanced Micro Devices in virtual reality (VR). NVIDIA recently expanded its VR reach with new graphics cards for VR-ready notebooks. And the company is looking to its cloud-computing technology to power VR computers down the road as well.

Additionally, many investors are looking to NVIDIA's Drive PX computer to fuel more revenue growth. NVIDIA already sells its semi-autonomous car technology to 80 automakers and Tier 1 suppliers, and a recent update to the company's driverless car SoC shows the company isn't backing off of its driverless car plans.

Can NVIDIA keep rising?

There are a few signs indicating that NVIDIA could be in for some rougher waters ahead.

I wrote a few months ago that Intel's new Knights Landing cloud processors might eventually threatenNVIDIA, and since then Intel has put even more pressure on the company with the debut of its deep learning processor, Knights Mill. Intel says its processors are faster than NVIDIA's GPUs.

Investors should expect even more competition between these two companies going forward as they both look to get in edge in data centers and powering cloud computing.

Additionally, recent news that Qualcomm might be buying NXP Semiconductors could chip away at NVIDIA's place in the driverless car market. I wrote back in May that NXP's off-the-shelf semi-autonomous system (called Bluebox) poses one of the biggest threats to NVIDIAin the driverless car space, and if Qualcomm snatches up NXP, then it will instantly be a major competitor with NVIDIA in the automotive semiconductor space.

And last but not certainly not least, NVIDIA's arch rival in GPUs, AMD, has managed to gain market share recently in the GPU market, and there's much more room for growth. AMD could also benefit from the growth of virtual reality. AMD supplies VR graphics cards for both computers andSony's PlayStation 4. Sony could be poised to benefit from VR very soon, and AMD might ride the company's coattails there.

Investors looking for NVIDIA to keep up its skyrocketing stock price growth should keep all of this mind. It doesn't mean that NVIDIA's isn't still a great company, but rather that expectations for immediate returns should be kept in check.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends NVIDIA, NXP Semiconductors, and Qualcomm. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.