NVIDIA Corp is a value investment for virtual reality, robots, and autonomous vehicles. Notably, the chip maker could cash in on all of those fast-growing segments.
For example, NVIDIA (NASDAQ: NVDA) is demonstrating the first artificial intelligence (AI) technology that builds virtual reality (VR) from scratch. In detail, they build most VR with existing or images or graphics.
For instance, creators have to add VR to existing graphics or take special VR footage of subjects in the real world. Hence, to create a VR movie you have to make a traditional movie and convert it into VR.
NVIDIA Corp is opening new frontiers in VR
However, NVDIA’s new AI generates all-new VR graphics from scratch, Fast Company claims. Thus, NVIDIA’s AI could reduce the cost of virtual reality and increase its use.
For instance, a producer could create scenes for a movie or TV show without using sets, stock footage, or even actors. Instead, the new AI built by NVIDIA Corp and the University of California at Berkley allows for the creation of original material in VR.
Therefore, the new technology could create new markets for NVIDIA’s graphics processors. For example, in computers that will build games or make architectural designs.
In addition, there will be a huge demand for VR simulators. Notably, NVIDIA used the new VR examined by Fast Company to create a driving simulator.
A NVIDIA Corp (NVDA) AI is Writing Songs
Virtual reality is not the only thing the NVIDIA Corp (NVDA) AI can create. In fact, a press release claims an AI that runs on NVIDIA processors is writing rock songs.
Musicians unions will hate AIVA’s technology because it can synthesize complete songs without a band. Moreover, AIVA’s AI is demonstrating some scary capabilities that could have uses far beyond music.
“AIVA is an artificial intelligence that has learned the art of music composition by reading over 30,000 scores of the world’s greatest composers,” AIVA founder and CEO Pierre Barreau claims. To demonstrate, AIVA, its creators and NVIDIA created a song inspired by Queen.
The press release did not say if the artificial intelligence will receive royalties for the music. On the other hand, I am scared because an AI that can write music could write essays, articles, or fiction. In addition, such an AI could write software or advertising copy.
Robots and AI invade retail that’s good for NVIDA Corp (NVDA)
Beyond VR, one of the fastest growing markets for NVIDIA processors is one many investors will not see coming. Surprisingly, that market is retail which is becoming heavily robotized.
In fact, Walmart (NYSE: WMT); the world’s largest retailer, is deploying robot janitors and inventor checkers. Notably, Walmart is ordering 360 autonomous floor cleaners, CNN reports. In addition, Walmart is using robots to check inventory in stores.
This is good for NVIDIA Corp because a processing unit will run each robot. NVIDIA is one of the best-known builders of processing units and supercomputers for the operation of drones and other vehicles.
Nor is it just Walmart, America’s largest standalone grocer Kroger (NYSE: KR) and Ocado Group PLC (LSE: OCDO) are planning 20 massive fulfillment centers across America. Swarms of self-navigating robots will man each fulfillment center.
In particular, NVIDIA could easily adapt the processors it builds for autonomous cars for use in retail robots. To explain, retail robots need to navigate obstacle courses and see objects around them like self-driving cars.
NVIDIA Corp is merging robots with AI
Moreover, NVIDIA Corp is building a supercomputer for robots and drones called the NVIDIA Jetson TX2.
A press release describes the NVIDIA Jetson TX2 Module as “the fastest and most efficient AI computing device.” Impressively, the Jetson TX2 is a supercomputer that can run true artificial intelligence in drones and robots.
For instance, a French company called Notio Plus is using the Jetson TX2 to run a submarine drone called the iBubble. iBubble is described as the “world’s first autonomous underwater drone.”
Potential uses of iBubble include weapons delivery for navies, exploration, rescue, scouting missions, underwater repairs, oil and gas exploration, and salvage. Obviously, if the Jetson TX can operate a submarine, it could operate a wide variety of vehicles.
Other uses for Jetson TX could include operating earthmovers, aircraft, mining machines, demolition machines, military drones, rescue drones, delivery drones, crop-dusting, firefighting, healthcare, street sweepers, floor cleaners, farm machines, trains, subways, Hyperloop, robot taxis, air taxis, forklifts, cranes, and spacecraft to name a few.
The Autonomous Vehicle Boom is good for NVIDIA Corp
Another signature NVIDIA Corp technology; autonomous vehicles, are a step closer to widespread adoption.
In fact, Alphabet’s (NASDAQ: GOOG) subsidiary is opening Waymo One its self-driving taxi service up for public use in Arizona. Importantly, Waymo One will allow the public to hail and hire its autonomous Chrysler Pacifica Minivans.
Thus, Waymo is laying the groundwork for a huge market for NVIDIA Corp technology. Notably, NVIDIA is developing NVIDIA Drive a scalable AI platform for autonomous driving. In detail, Drive is an operating system and processor self-driving vehicles.
Unlike Tesla Motors (NASDAQ: TSLA), NVIDIA will sell Drive to automakers and other manufacturers. Since almost every major automaker is building self-driving vehicles, there could be a huge market for Drive.
Additionally, NVIDIA could easily adapt Drive for other uses such as retail robots, warehouse vehicles, mining, earth moving, farming, and construction. For instance, Drive could run a self-driving farm tractor, a forklift, a train, an autonomous bulldozer, or a robotic front-end loader.
Yes, NVIDIA Corp is a Classic Value Investment
All this makes NVIDIA (NASDAQ: NVIDIA) a classic value investment because it manufactures the basic technology and infrastructure everybody else needs.
To explain, NVIDIA is not investing all the money and resources needed to commercialize pieces of a complex technology like automobiles, drones, and robots. Instead, NVIDIA is building the basic components; the processors and supercomputers and selling them to manufacturers.
Hence, NVIDIA makes the money but does not take the risks. For example, this spares NVIDIA Corp all the trouble and expense of designing and building a self-driving vehicle.
Companies like Ford (NYSE: F) assume the risks and expenses of the autonomous vehicle development instead of NVIDIA. For instance, Ford builds the factories, forms the dealer relationships, feuds with the United Autoworkers, distributes the vehicles, and finances them.
All NVIDIA needs to do is ship the processors to Ford, or Tata Motors (NYSE: TTM), or General Motors (NYSE: GM), or Daimler AG (XETRA: DA), or Toyota Motor (NYSE: TM). Those companies will figure out how to build the vehicles and develop the market for them.
For example, Toyota, Tata, and Fiat Chrysler (NYSE: FCAU) are taking part in Waymo’s autonomous vehicle experiments in Arizona. For example, Waymo Pacifica vans made by Fiat Chrysler are hauling people to and from Walmart stores.
NVIDIA Corp (NVIDIA) is still making a lot of money
NVIDIA Corp’s (NVIDIA) financial numbers show this business model is lucrative.
For instance, NVIDIA reports a gross profit of $1.921 billion on revenues of $3.181 billion for 4th Quarter 2018. Thus NVIDIA had a gross margin of 60.39% at the end of 4th Quarter 2018. Notably, Stockrow reports those revenues grew at a rate of 20.68% during 4th Quarter 2018.
Under those circumstances, NVIDIA achieved an operating income of $1.058 billion and a net income of $1.23 billion for 4th Quarter 2018. In addition, NVIDIA records an operating cash flow of $487 million, an investing cash flow of $219 million, and a free cash flow of $337 million for 4th Quarter 2018.
Hence, NVIDIA Corp (NVIDIA) is a cash-rich company. To demonstrate, NVIDIA had $721 million in cash and equivalents and $6.87 billion in short-term investments on 28 October 2018. Thus, NVIDIA recorded $7.591 billion in cash at the end of 4th Quarter 2018.
Yes NVIDIA Corp (NVDA) pays a Dividend
Investors like NVIDIA because it pays a dividend. Notably, NVIDIA shareholders will receive a 16¢ Christmas gift dividend on 21 December 2018.
To add icing to the cake, that dividend is up 1¢ from 21 September 2018 when NVIDIA paid 15¢. Moreover, dividend growth is an old story at NVIDIA, Dividend.com reports its dividends have been growing for five years.
Besides growth, NVIDIA shareholders were enjoying a dividend yield of 0.42%, an annualized payout of 64¢, and a payout ratio of 9%, on 11 December 2018. Thus, NVIDIA is a growth stock with a growing dividend that is becoming a bargain.
NVIDIA shares are a bargain because its shares lost over half their value in a little over two months. To demonstrate, NVIDIA Corp (NASDAQ: NVDA) shares were trading at $289.36 on 1 October 2018. Yet, by 14 December 2018 NVDA was trading at $146.45. Thus I think now is a good time to buy NVIDIA Corp (NVIDIA).