Is NVIDIA the Perfect Value Investment for the 21st Century?
NVIDIA (NASDAQ: NVDA) might be the perfect value investment for the cryptocurrency boom and the 21st Century. The manufacturer is in a position to make money off cryptocurrency without owning a single altcoin.
NVIDIA manufactures the graphics cards that cryptocurrency miners and traders need to harvest their digital assets. Demand for high-end graphics cards; one of NVIDIA’s key products is so great that gamers cannot find them at Best Buy (NYSE: BB), Ars Technica reported. Graphics cards are in short supply because cryptocurrency miners are buying all of them.
Is Ethereum’s Coin Price responsible for NVIDIA’s high profits?
A big reason why graphics cards are in short supply is that they are perfect for Ethereum (ETH) mining.
Ethereum is among the fastest growing cryptocurrencies, between 11 February 2017 and 13 February 2018 Ethereum’s Coin Price went from $11.37 to $854.46, data from Coin Market Cap indicates. Even with the recent market correction, those who bought Ethereum last year and held made a lot of money.
Gamers are having a tough time because shelves at retailers are empty and used GPUs are selling for hundreds of dollars online, Ars Technica reported. Many of them end up settling for cheaper Chinese made cards which do not work as well.
“Strong demand in the cryptocurrency market exceeded our expectations,” chief financial officer Colette Kress said during NIVIDIA’s 8 February earnings call. Inflated prices for graphics cards are boosting NVIDIA’s profits, Ars Technica reported.
NVIDIA is making a Lot of Money
Gamers’ pain is NVIDIA stockholders’ gain; the manufacturer is making lots of money off the cryptocurrency bubble.
The company’s year-to-year net income grew by 54.61% to $838 million during 4th quarter 2017, Google Finance reported. During the same quarter the year-to-year operating income grew by 40.60% to $814 million and year-to-year revenues grew by 31.54% to $2.64 billion.
That caused the year-to-year net profit margin to grow by 17.52% and the diluted year-to-year earnings per share to expand by an eye-popping 60.24%. Value investors will like these figures because NVIDIA’s cash is growing as well.
The company’s year-to-year cash on hand grew by 44.43% to $2.8 billion during 4th quarter 2017. That means its float is also growing dramatically as demand for GPUs booms.
All is not perfect at NVIDIA though, the year-to-year cost of revenue increased by 29.96% rising to $1.07 billion during 4th Quarter 2017. NVIDIA is making more money and keeping more cash, but it is costing more to generate those revenues.
Is NVIDIA a Value Investment in Cryptocurrency?
All this will make value investors think of one of Warren Buffett’s favorite investment strategies.
That is buying the companies that manufacture the equipment used by those in the industry. Berkshire Hathaway’s (NYSE: BRK.A) subsidiaries include equipment suppliers such as MiTek.
The value investors make money without taking the risks. They also make money no matter what cryptocurrency is popular this week. Best of all, the value investors’ profit increases whenever a new use is found for an underlying technology.
Is the ICO Boom Driving NVIDIA’s profits?
One reason for the shortage of processing cards is the huge popularity of Ethereum-based ERC20 initial cryptocurrency offerings (ICOS) and utility tokens. Hundreds of companies are planning ER20 ICOs; and issuing Ethereum-backed utility tokens. All of those organizations need grahics cards to operate their systems.
The popularity of ERC20 tokens can increase Ethereum values because such tokens can be converted into Ethereum (ETH) cryptocurrency. Participants in ERC20 ICOs often sell the tokens for Ether (ETH) to generate extra cash.
That means high demand for processing cards is likely to continue because of the huge number of ERC20 ICOs. The ICO Alert website; which lists several hundred ICOs, will give you an idea of the volume of this market. ERC20s are just the tip of the iceberg there are many other ICOs using different technologies that also require graphic cards to mine or generate.
The ICO boom means that the high demand for graphics processors and strong business at NVIDIA are likely to continue for some time perhaps several years. What’s even more exciting is that an even greater opportunity that will generate far more business for NVIDIA is just over the horizon.
The Combination of Blockchain, Artificial Intelligence, and Robotics will make a lot of money for NVIDIA
The opportunity will be the intersection of artificial intelligence (AI), automation, robotics, and the blockchain. NVIDIA stands to profit big time from robots, self-driving vehicles, industrial equipment, and other machines operated by blockchain-based solutions.
Such machines are already here, and almost on the market. A company called Aitheon is planning to sell robots called Mechbots that are run by a blockchain platform. Aitheon plans to build a platform that will enable artificial intelligence and algorithms called Digibots to operate a variety of machines through the blockcchain.
If that was not enough, Aitheon will let humans operate machines by remote control through its blockchain as pilots. A major use of this technology would be to operate industrial machines such as lathes and self-driving vehicles.
Aitheon is already working with NVIDIA’s Driveworks autonomous vehicle initiative. It demonstrated a blockchain operated Jeep Rubicon that navigated the Rubicon Trail, and is planning to test a fleet of self-driving delivery vehicles with CarSmartt’s help. Beyond that, Aitheon is planning to test automated retail stores similar to the Amazon Go experiment.
All that will be an opportunity for NVIDIA because those devices will need processors. NVIDIA will be one of the companies providing them. It already builds processors for Tesla Motors’ auto pilot self-driving solution.
To add icing to the cake, Aitheon is far from alone. A company called SyncFab is already taking orders for components manufactured by computer-numerical control (CNC) operated devices like lathes and grinders. The plans for the components are sent to the devices via SyncFab’s blockchain platform.
A future development from that will be a market for processors that will operate blockchain-enabled industrial machines such as 3D printers. NVIDIA is likely to build those processors as well.
The Vast Market for Autonomous Vehicles
Then there are autonomous and semiautonomous vehicles such as the Tesla semi which will need processors.
A huge market for such processors might be aerial vehicles. Several organizations including Uber, Lilium, and the Blockchain.aero consortium are planning to build networks of autonomous flying vehicles. Those vehicles will be operated by powerful processors that can be built by NVIDIA.
There are many other untapped markets for autonomous vehicles out there. Earth-moving machines and mining equipment are two logical applications of self-driving or remote-piloted vehicles. The biggest opportunities will be for machines operating in hazardous and remote locations — such as underground mines. Other potential uses of such vehicles include logging, construction, firefighting, rescue, emergency cleanup, hazardous-waste cleanup, and demolition.
A wide variety of other potential uses for autonomous and remote piloted vehicles exists. Some obvious utilizations include locomotives, streetcars, buses, subways, firefighting, light rail, ships, tugboats, submarines, exploration, surveying, delivery drones, and military vehicles of all shapes and sizes. The Russian Army is already experimenting with self-driving tanks.
NVIDIA might be the perfect value investment for the 21st Century. The incredible number of potential uses of its technology indicates that NVDA was undervalued at the $238.25 share price reported on 14 February 2018.
This story initially appeared on The Market Mad House — please take a look at it.