A couple of years ago, before I began following a dividend growth strategy, I was looking at a company called Nvidia. Nvidia Corporation is an American tech company responsible for producing graphical processing units for the gaming industry. They also develop system on a chip units (SOCs) for the automotive and mobile computing industries. Nvidia is in direct competition with companies like Intel, AMD, and Qualcomm. The company has had a great year and surged over 300% since I examined them in 2014.
Image by [Yahoo Finance].
What’s remarkable is how Nvidia continues to flourish despite tepid PC sales. As of this year, Nvidia’s market share for high end computer graphics cards hovers around 80%! They know how to innovate and continue to take advantage of today’s latest technologies. In doing so, Nvidia opened itself up to even greater opportunities. They now continue to benefit from the explosive growth of cloud computing, automotive technology, and even virtual reality.
What appears to be most provocative is their automotive technology. Working with partners like Honda and Tesla, Nvidia works tirelessly to develop advanced integrated driving systems. These systems include entertainment, service information, traffic updates, and the like. Furthermore, Nvidia’s GPU powered self-driving cars present tremendous opportunity. Although the technology is in its early stages we may eventually live in a society where car insurance is no longer needed and self-driving cars are the norm. Driving may one day become safer than walking! The sky is truly the limit.
Image by [Bloomberg News].
Nvidia is also in a position to take advantage of virtual reality and augmented reality gaming. Such technology takes a great deal of computing power, an area where Nvidia shines. According to Venture Beat, VR gaming is seven times more graphically intensive than non-VR games. Companies like Sony, Microsoft, and even Facebook are already releasing VR/AR related products. Because of Nvidia’s dominance in high end graphics cards they are in a prime position to capitalize on these new trends.
Image by [cnbc.com].
So what’s my point? My point is I saw these trends early and missed them! When Nvidia was trading at $17 I remember reading articles about how they were developing the technology of the future. Now it’s over $60! At this point these various opportunities may already be priced into the stock. With a P/E around 40 NVDA is quite expensive. Therefore, even though we are dividend investors we should still keep our eyes open. Most of us focus solely on large, established companies with strong track records. However, in some cases, it might make sense to set aside some “play” money. It may be worthwhile deviating slightly from one’s core strategy to capitalize on favorable market trends. Growth companies like Nvidia carry great risk. However, great risk may be the key to even greater reward!
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