Here’s Why NVIDIA is the Next Intel

nvidia-nvda-logoChipset maker NVIDIA Corporation (NASDAQ:NVDA) is making a case to become the most important name in the microchip world — even surpassing its behemoth rival Intel (NASDAQ:INTC).

The reason is simple: NVIDIA’s technology is being used in far more game-changing devices, which puts it at the forefront of technological innovation for the next several years. From CNBC:

Nvidia’s semiconductors are powering innovation in some of the world’s fastest growing industries. Its core graphics processing units (GPUs) enable popular video games like “Battlefield 4″ and “Call of Duty: Black Ops III.” And as computing rapidly evolves in the cloud and Internet of Things, Nvidia’s technology is being adopted by companies focused on big data, artificial intelligence and autonomous driving.

Brian Alger, an analyst at Roth Capital Partners, has been bullish on the stock for a while.

“They’re in several massive growth markets where they have differentiated solutions, very few competitors and are executing extremely well,” Alger said.

Massive growth markets and very few competitors? That’s how people were talking about Intel in the late 90s, when the company went from an unknown to one of the faces of the technological revolution. When it comes to what remains of its competition, well, NVIDIA investors shouldn’t be worried.

AMD no longer poses much of a threat. That company has lost money each of the past four years and, when it comes to Nvidia’s newer businesses, there aren’t many rivals.

Again, this sounds exactly like Intel when it first began taking off. Back then, a company called Cyrix was making processors too. But they fizzled and went out of business entirely, leaving Intel as the only game in town.

When it comes to artificial intelligence, NVIDIA isn’t just the clear leader. They’re the only name anyone of consequence in the space even thinks about.

Nvidia is selling its technology into data centers, which are rapidly moving towards machine learning and artificial intelligence. Within data centers, Nvidia has gained traction in recent years helping businesses process mounds of data coming from all the devices connected to the Internet. The next step is training those machines through algorithms to learn like humans.

Nvidia “anticipated the emergence of these applications and invested in these applications and helped develop them, whereas their main competitor AMD was more constrained and resource challenged,” said Ian Ing, an analyst at MKM Partners. He has a buy rating on the stock and a $64 price target.
Venture capitalist Marc Andreessen said in a podcast last month that Nvidia has “seemingly overnight” become the market leader in chips used for artificial intelligence.

“Every sharp AI software entrepreneur that comes in here is now building on top of Nvidia’s chips,” Andreessen said.

Automakers, too, are using NVIDIA’s technology in their audio/video systems. And NVIDIA leads the way in autonomous driving chips as well. That’s a niche market now, but will explode tenfold in the coming years, say analysts.

Once upon a time, the only people who’d heard of NVIDIA were PC gamers looking to max out the high-resolution graphics performance of their gaming rigs. Now, the company has made it to the big time, and seems to have a date with destiny: a seat at the table next to Intel as microchip royalty.

NVIDIA shares rose $2.54 (+4.25%) to $62.24 in Friday afternoon trading. NVDA has gained 89% year-to-date, making it the second best-performing stock in the S&P 500 in 2016.

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