We all know that artificial intelligence (AI) is the next big thing, but can it actually make money? The answer to that question provided by NVIDIA (NASDAQ: NVDA) is yes it can
NVIDIA calls itself an “AI computing company” but it specializes in graphics processing units (GPUs) the infrastructure that streaming video and video games run on. That might make NVIDIA a value investment because video-content of all shapes and sizes is spreading like weeds these days.
Why NVIDIA is a Potential Value Investment
Some of NVIDIA’s tech is pretty impressive it includes the Tesla V100 which is billed as the most advanced AI GPU ever built. Among other things that makes Tesla Motors (NASDAQ: TSLA) autopilot system for self-driving cars and trucks possible.
There’s also the GPU Cloud which is supposed to make deep learning available for everybody, everywhere, and NVIDIA DGX SHIELD TV to enable NVIDIA-powered gaming at home. NVIDIA SHIELD TV might become a huge moneymaker given all the time some people spending playing video games.
NVIDIA SHIELD TV is a gaming system connected to GPU Cloud that is empowered by Alphabet’s (NASDAQ: GOOG) Google assistant. Among other things, it enables you to access content from YouTube through it. That sounds like a huge potential generator of float to me, millions of gamers and video addicts paying a monthly subscription for YouTube Red and SHIELD equals a massive revenue stream. If it works as advertised, NVIDIA SHILED TV is supposed to offer the smoothest 4K HDR video around.
Finally, there’s the NVIDIA DGX Systems, the world’s first portfolio of purpose-built AI Supercomputers. That sounds like a huge moneymaker to me because the DGX Systems are built for leading AI research. All the companies and governments planning to harness AI will need something to develop it on, and NVIDIA is selling technology that creates the AI.
All of this points to a classic value investing strategy; do not buy the high-profile brand that puts the products before the public. Buy the company that makes the tools they use. In the AI revolution, NVIDIA is that company because it makes the infrastructure AI needs to operate on.
Is NVIDIA Making Money?
The value elevator pitch sounds great, but the smart investor will ask is NVIDIA making money right now? The answer is yes, it is.
NVIDIA reported a net income of $2.582 billion (€2.14 billion) on 31 October 2017. That income has grown dramatically over the past year; it was $1.219 billion (€1.04 billion) in October 2016. More importantly that income has more than quadrupled in the last two years, NVIDIA reported an income of $600 million (€509.96 million) in October 2015.
Basically, NVIDIA’s income has grown by $1.982 billion (€1.68 billion); nearly $2 billion (€1.7 billion), in the past two years. Nor is that growth slowing, NVIDIA added $1.363 billion (€1.16 billion) in income during the 12 months between Halloween 2016 and 31 October 2017.
NVIDIA has a lot of Cash
Beyond income, NVIDIA is sitting on a lot of cash; it reported $6.32 billion (€5.37 billion) in cash and short-term investments on 31 October 2017. That is an impressive achievement for a company that reported just $8.976 billion (€7.63 billion) in revenues and $9.83 billion (€8.35 billion) in assets for 3rd quarter 2017.
The other cash figures at NVIDIA are also great; the company reported $1.088 billion (€920 million) in free cash flow on October 31, 2017. That was more than four times the $394 million (€334.88 million) in free cash flow NVIDIA reported on 31 October 2016.
Cash from operations has also grown dramatically. NVIDIA reported $1.462 billion (€1.24 billion) in cash from operations in October 2016, and $2.865 billion (€2.44 billion) in October 2017. That means NVIDIA’s cash from operations grew by $1.403 billion (€1.19 billion) in just 12 months.
NVIDIA’s Revenues are Skyrocketing and it pays a Dividend
All this comes from revenues that are skyrocketing at NVIDIA. The company reported $4.86 billion (€4.13 billion) in revenues in October 2015; that number increased to $6.138 billion (€5.22 billion) in October 2016, and $8.976 billion (€7.63 billion) on Halloween Day 2017. NVIDIA’s revenues increased by $4.116 billion (€3.50 billion) in two years; and grew by $2.838 billion (€2.41 billion) in one year.
Shareholders went along for the ride, NVIDIA shares had a 43.7% return on equity on October 31, 2017. To add icing to the cake, NVIDIA even pays a dividend, 15¢ (€0.13) on November 22, 2017. That dividend is growing it was 11.5¢ (€0.0977) in May 2016, 14¢ (€0.12) in November 2016, and 15¢ (€0.13) a year later.
More importantly, NVIDIA is sitting on a lot of cash that might be used to increase the dividend at any time. If you’re looking for a potential dividend king NVIDIA is certainly it. This stock was certainly worth the $191.49 (€162.76) share price reported on December 8, 2017.
NVIDIA is a great growth stock with a lot of value characteristics because of all the cash the company has. So yes, you can make money from artificial intelligence as long as you own NVIDIA. If you are looking for a growth tech stock to add to your portfolio, you should definitely take a look at NVIDIA, it is cashing in on both artificial intelligence and video.