NVIDIA well placed in a ‘Metaverse’ world

Artificial intelligence (AI), augmented reality (AR) and the metaverse. They may sound Greek to many people, but there is no denying that these concepts are gradually entering the reality of our day to day lives.

Take for example the video games that keep your children glued to their Xbox, game consoles and PC monitors. What about the video and audio apps that let you communicate with your workmates across the world? Then there are the constant social media chats, clicks, scrolls and postings that seem to eat up so many people’s days.

Whether you know it or not, chances are there are some components of artificial intelligence and augmented reality behind every communication and social media interaction you participate in every day.

As the world moves into more remote and virtual settings in the post-Covid and post-lockdown environment, technology companies – hardware and software makers, digital app producers, AI and AR designers – will continue to play a big role in the years and decades to come.

While the big names like Apple, Google and Meta (formerly Facebook) continue to dominate, there are many other technology players that are making great strides in delivering not only leading-edge technology but strong investment returns.

NVIDIA (NASDAQ: NVDA) is one of those companies.

In this article, we will look at Nvidia which has a strong potential to do well and take more market share in the ‘metaverse’ world.

Who is NVIDIA and what does it do?

Nvidia is recognised as a pioneer in the design and production of graphics processing units (GPU), which grew hand-in-hand with the growth of the personal computer (PC) gaming market. It also redefined modern computing with the advent of crisp, sharp and lively graphics that gave life to an otherwise bland and dreary text-based computing experience in the early days.

While its initial foray into the GPU space targeted the niche gaming market, Nvidia has expanded its reach into different markets including GPUs for deep learning and AI. Today, Nvidia technology is at the core of robots, self-driving cars and other automated applications.

A recent company presentation showed Nvidia’s partnerships with different industry giants including BMW (automotive) and the healthcare sector.

For example, Nvidia’s suite of acceleration libraries (NVIDIA Clara) is now being used for computational drug discovery, imaging, quantum chemistry, genetics sequencing and AI to generate new drug compounds.

What’s behind NVIDIA’s success

There’s no question that Nvidia’s GPU technology is at the core of its leadership position in the computing industry. With all the talk and forecasts for a ‘Metaverse’ world – where all the virtual and digital apps converge to connect people whether at home, in the office, in school or businesses – technology experts and financial market analysts are one in giving the thumbs up to Nvidia.

A recent market analysis report pointed out that “the metaverse could unlock a US$10 billion revenue opportunity for Nvidia”. This is because Nvidia already has the building blocks needed to create the metaverse.

According to this report: “Nvidia’s massive market share in graphics cards places it in a solid position to benefit from the metaverse. That’s because graphics cards will be the basic building blocks of the metaverse, as they will play a key role in rendering augmented reality models in real-time.”

Analysts at Wells Fargo estimated that the adoption of Nvidia’s Omniverse could witness a spike as enterprises turn to the platform to enhance productivity using real-time simulation. It’s been reported that the investment bank recently increased its price target on Nvidia stock to US$320 from $245 (which has already been hit the past few weeks).

A technology analyst recently released an equally glowing report which pointed out Nvidia is still the graphics king.

During the company’s annual technology update conference, Nvidia (NVDA) unveiled a sweeping array of new technologies ranging from an AI-powered chauffeur that can park your car to a tool to predict the paths of wildfires.

“Nvidia still makes the majority of its money from the sale of those cards. Its gaming unit accounted for 47% of total revenue in the second quarter, while the data centre business accounted for 36%. Nvidia dominates with roughly 83% of market share,” the technology analyst said.

Many analysts covering Nvidia agree that the company’s rapid growth — and its ability to sustain the same — justify the expensive valuation.

Consider these strong numbers:

  • 68% year-over-year revenue growth in the second quarter of fiscal 2022
  • 89% jump in earnings on the back of terrific growth in the data centre and video gaming segments

An analyst at Wedbush Securities said: “Nvidia is still as formidable as they come.

“They make their products very sticky by creating software infrastructure that makes it hard for customers to shift, particularly in the data centre market. And that it’s just really hard for competitors to replicate that.”

The analyst highlighted that Nvidia also benefits by selling full-on supercomputers for AI applications, which can go for hundreds of thousands of dollars.

What the charts are saying about NVIDIA share performance?

Investors certainly appear to have a positive outlook for Nvidia. It currently has one of the strongest upward trends of the key metaverse companies and hit new record highs during November on trading volumes that were considerably higher than average.

After posting gains in excess of 67% in the brief period between the start of October and mid-November, it would not be surprising to see a near-term pullback in price. However, while dips remain above support around the US$288 level, we would view such moves as corrective with potential retained for further gains beyond US$330.

Conclusion Given its solid share price performance over the past two years, a solid leadership position in the GPU cards market and all signs of AI, AR and metaverse all becoming part of our digital lifestyle, Nvidia looks set for strong and ongoing growth in the coming decades. You can trade NVIDIA here.


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