Many of the most popular stocks among investors seem to be jumping on the stock splitting bandwagon, but the historical volatility that is currently plaguing Wall Street has taken center stage. The Standard & Poor’s 500 and the Nasdaq Composite Both are weak in correction, while the tech-heavy Nasdaq has plunged into bear market territory, currently down 23% from its November high.
This creates some compelling opportunities. nvidia (NVDA -0.90%) The 4-for-1 stock split sank less than a year ago, after years of strong growth that has pushed stocks out of the reach of many retail investors. However, a bear market took its toll on the chip maker, sending its stock down more than 40%, even as the company achieved record results.
one for books
To understand the scale of the opportunity, investors should first take a look at Nvidia’s recent financial performance. In fiscal year 2022 (which ended Jan. 30), Nvidia generated revenue of nearly $27 billion, up 61% year over year, while earnings per share (EPS) of $3.85 were up 123%. But that is only part of the story. In addition to record fiscal year results, Nvidia also posted record fourth-quarter results in the gaming, data center, and professional visualization segments.
This strong performance was underpinned by strong and continued demand for GPUs, which are the top choice for diehard and casual gamers alike, driving a 61% increase in gaming revenue last year. While that would be reason enough to be optimistic about Nvidia’s growth prospects, this is just the beginning.
head in the clouds
Several years ago, the semiconductor maker saw the writing on the wall and focused its efforts on creating processors for cloud computing and data centers. The parallel processing ability of Nvidia’s GPUs – which process many complex mathematical calculations simultaneously – makes them uniquely suited to handle lightning-fast data traffic over the air, resulting in faster response times for users.
Don’t take my words seriously. Amazon Web Services (AWS), the alphabetGoogle Cloud, and Microsoft Azure all trusts their Nvidia handle, as they do Ali Baba clouds, IBM cloud and inspiration Cloud – and these are only big dogs. Many other cloud service providers and data centers rely on Nvidia.
The widespread adoption of large and small cloud platforms has driven company data center revenue by 58% in fiscal year 2022.
More where it came from
Management anticipates continued strong growth of the company. Nvidia is guided by fiscal 2023 first-quarter revenue of $8.1 billion, a 43% year-over-year increase in the middle of its guidance and a 6% increase sequentially. The company also expects an already impressive gross margin increase of about 50 basis points.
It’s easy to understand why. The gaming, cloud computing, and data center markets are growing by leaps and bounds. Finally, management estimates that the total Nvidia instructable market will grow to $250 billion by 2023, indicating that the company has just scratched the surface of a large and growing opportunity—particularly in light of its 2022 fiscal revenue of just $26.9 billion. As the number one provider of chips used by gamers, cloud enthusiasts, and data centers alike, Nvidia is well positioned to ride these trends higher.
With its industry-leading position, strong tailwind, and massive routable market, Nvidia is the obvious choice for split stocks to buy now — at a discount — and keep forever.