NVDA Stock Forecast: NVIDIA Is Riding On A Wave Of Euphoria



The article was written by Yutian Fang, Financial Analyst at I Know First and Master of Science in Finance candidate at Brandeis International Business School


“Computing demand is greater than ever, so more than ever, we need this computing performance to continue to extend, we need to extend Moore’s law…As long as there is data, so long as there is knowledge in how to create the architecture, we can create absolute enormous software. And every single company in the world that develops software will need an AI supercomputer.” — Jensen Huang, NVIDIA president and CEO

Source: Purestorage.com


  • Stunning revenue growth in Q1 2018 and outstanding financial health
  • Potential market share gained by applications of AI into variety of industries
  • High P/E ratio supports our recommendation to hold in short term but a very bullish prospect makes NVDA a good long-term investment based on qualitative analysis and I Know First Forecast

NVIDIA Corporation (NASDAQ: NVDA) launched its NVIDIA Isaac robot platform at Computex 2018 in Taiwan on June 4th, 2018. Powered by Jetson Xavier, NVIDIA’s first computer designed specifically for robotics, with Isaac robotics software-Isaac SDK, Isaac IMX and Isaac Sim-supporting the computer’s simulation, training and deployment, NVIDIA Isaac will bring artificial intelligence to autonomous machine that makes them enable for applications across variety of industries. On the day followed by the announcement, the stock became one of the biggest risers on the S&P 500, with some 2.26% to a price of $264.85 per share.

NVIDIA CEO Jensen Huang, speaking at the company’s keynote at Computex 2018. Source: CNET

Market leadership in both GPU and processor segments

Graphics chip market shares for Q1 2018. Source: Jon Peddie Research

Desktop GPU market shares for Q1 2018. Source: Jon Peddie Research

Fueled by the growth of the PC gaming market, NVIDIA invented GPU, breaking the predicament that CPU started to under-perform Moore’s Law, and redefined modern computer graphics and revolutionized computing in parallel environments. Within less than twenty years, NVIDIA has taken the lead to gain advance in visual computing and makes it possible transforming PCs into gaming machines and further developing them with virtual reality. Currently, the computing power that inherited in GPU paves the way for machines learning from massive amounts of data and further AI applications in revolutionizing industries. According to Jon Peddie Research, from GPU shipments data for Q1 2018, NVIDIA’s overall unit shipments held steady at 18.4% from last quarter and achieved an increase of 2.6% compared to the same period of prior year.  Within the discrete desktop segment, where add-in boards (AIBs) use discrete GPUs in devices sold to higher end of the graphics, NVIDIA takes the market leadership with the split of 65/35 between these two major suppliers.

“In less than a decade, the computing power of GPUs has grown 20x-representing growth of 1.7x per year, far outstripping Moore’s law.” Huang said.

 Shares for devices using GPU in 2017. Source: Jon Peddie Research

According to Jon Peddie’s report for 2017 GPU developments, mobile devices contribute to 79% of the total devices using GPUs. In the mobile market, systems-on-a-chip (SoCs) has risen at the same rate as mobile devices. Cooperating with Nintendo, NVIDIA has built production lines of its Tegra processor portfolio-Tegra X1, Tegra K1 and Tegra K4 Family-and put focus on improving working efficiency for mobile and automotive applications, supercomputer and gaming devices. As disclosed in the report for fiscal year of 2018, the sales in the Tegra processor segment achieved $1.53 billion, with a growth of 86% from a year ago, which are primarily composed of revenues from SOC modules for Nintendo Switch gaming console and development services, and automotive business.

Stunning revenue growth and strong free cash flow generation

NVIDIA financial data for Q1 2018.  Source: NVIDIA

As released in its latest 10-Q, for the quarter ended on April April 29th , NVDA reported a revenue of $3,207 million, achieving a year-over-year total revenue increase of 65.57%, well outperforming its competitors’ average level of 18.08 %. In specialized markets, for the GPU segment, gaming GPU increased by 68% from a year ago due to the demand boosted by gamers playing eSports, rising popularity of Battle Royale Genre and AAA cinematic action games. Led by strong sales of Volta architecture, revenue from data center was up 71% from a year ago and up 16% sequentially. For the OEM&IP sector, the revenue went up 151% from the prior year and as the company reported, 75% of the OEM business came from crypto-specific GPUs due to the cryptocurrency demand that exceeded expectations. Professional visualization attained a revenue of $251 million with a growth of 22%. For Tegra processor side, revenues from SoC modules and Automotive were $442 million and $145 million respectively, particularly, the growth of the latter was up 10% sequentially due to the production of DRIVE PX platforms and development agreements signed with automotive companies. The gross margin has improved and net income rallied due to the strong revenues from data center and gaming GPUs in the first quarter and net income reached to $1,224 million, 145% higher than the first quarter last year. NVIDIA expects the second quarter revenue of $3.1 billion, plus or minus two percent, which is above market estimate of $2.95 billion.

NVIDIA’s levered free cash flow for the past ten fiscal years. Source: Finbox

 NVIDIA’s debt, net worth and cash level from 2012 to 2018. Source: Simply Wall Street

NVIDIA’s levered free cash flow exceeded $1 billion in 2016 and peaked at $2.9 billion for the latest twelve months, significantly outperforming the average level ($17.5 million) of Information Technology sector which the company belongs to. Other major competitors like AMD and Intel generated $145 million and $11.8 billion respectively. The company’s solvency situation also proved its financial health. The outstanding debt-to-net worth ratio, increasing from 0.4% to 25.9% over the past five years, reflected the company’s rapid expansion, but the debt was well covered by operating cash flow. The company’s cash and other current assets were able to meet both of its short-term and long-term obligations.

Tremendous potential creating market share

HGX-2 was announced at GPU Technology Conference on May 28th, a year after the launch of NVIDIA HGX-1, which already won broad adoption among the world’s leading server makers and companies operating massive datacenters like Amazon Web Services, Facebook and Microsoft. This computing platform incorporates such breakthrough features as NVIDIA’s NVSwitch interconnect fabric, connected by 16 NVIDIA Tensor Core GPUs to work as a single giant GPU to power both artificial intelligence and high-performance computing (HPC) workloads. Leading computer makers and server makers, along with four of the world’s top original design manufacturers (ODMs) announced plans to bring their own HGX-2-based systems to market later this year.

“Foxconn has long been dedicated to hyperscale computing solutions and successfully won customer recognition. We’re glad to work with NVIDIA for the HGX-2 project, which is the most promising solution to fulfill explosive demand from AI/DL.”— Ed Wu, corporate executive vice president at Foxconn

HGX-2 server platform. Source: Techspot

NVIDIA is gearing up to maintain its leadership in the existing markets and riding the waves of AI and HPC, it also embarks on aggressive exploration in many other industries like manufacturing, logistics, agriculture, automotive, etc., which will bring more market potentials. In entertainment industry, combining RTX technology for accelerating ray tracing with other real-time graphics technology and artificial intelligence, NVIDIA promises to accelerate today’s traditional, CPU-driven render farms. In healthcare industry, NVIDIA’s Project Clara promises to put GPU computing work in medical instruments to improve the fidelity of images while using less power. Other opportunities include safe cities and transportation, where NVIDIA is addressing with its end-to-end DRIVE platform.

Technical analysis and analysts recommendations

Source: StockTA

Since January 29th , NVDA stock had stalled for months, rising by only 2 percent and confirmed the upper bound with three times’ collision and meanwhile was losing the upward momentum as both the faster and slower MACDs could not reach the previous peaks and even crossed the 0 line after the third peak. The stock price was still in the projected range, though. Followed by the release of strong financial data for Q1 2018, NVDA stock price had surged and broke out the resistance level easily. After temporary retracement, the price rose even further and seemed to show a solid upside trend. Even though the bullish crossover has just shown in the MACD indicator, we noticed that the trading column did not increase at the same growth as the stock price, suggesting more momentum may be needed to aid the subsequent price climbing.

Currently, NVDA stock price seems to be overvalued as its PE ratio reaches to 42.2, well above the average level of 18.5 for semiconductor companies. The ratio indicates that bubble may exist. We think that in the short term, NVDA technical setup will remain strong but may be impacted by the seasonal demand drop of PCs, but over the long-term, the share price is very likely to rise.

Source: Yahoo Finance

As early as the beginning of April, Merrill Lynch added NVIDIA to US1 list with a whopping target price of $300. Currently, analysts from Yahoo Finance monitoring this stock tend to have the consensus that they are positive on the stock performance for the following months, 36 out of 38 analysts gave the recommendation to hold or buy.

Current I Know First Algorithm Forecast for NVDA

Go here to read how to interpret this diagram.

In I Know First Algorithm forecast dated on June 8th, 2018, the signals for shorter terms do not have very high positive values-1 Month forecast’s signal is 9.95 and 3 months’ is 22.40, although both of them have strong predictabilities, suggesting NVDA is a very predictable stock by learning from past predictions and actual movements. In the long run, I Know First’s forecast highly recommends to buy by providing a signal of 453.72 and a predictability of 0.79, which makes NVDA one of the most bullish stocks in the the package.

Past I Know First Forecast Success with NVDA

On August 15th, 2017, I Know First Algorithm gave very bullish forecast on NVDA. The signals for 1 month, 3 months and 1 year are as high as 27.78, 92.78 and 266.19 respectively. The predictabilities also showed strong confidence that NVDA stock price was very likely to soar, particularly for the long term, which was in accordance with our recommendation to buy based on qualitative analysis on the company’s market share and potential growth.

Stock price movement since I Know First last forecast

As seen in the graph of the stock’s actual movement, in the forecasting period of 1 year, the stock price rose by 57.07%, which is perfectly in line with our previous conclusion.

Current I Know First subscribers received this NVDA forecast on August 15th, 2017. To subscribe today, click here.


The company’s competitiveness in market leadership and new product launches supported by its technological superiority ensure its substantially growing market share in other industries. The outstanding revenue growth supported by the company’s healthy financial condition shows the NVIDIA’s capability for further expansion and development. We have a very optimistic view on the company’s prospect. Issues concerned for the second quarter of fiscal year 2019 are that, as the normal seasonality shows in the GPU and PC market, sales decline is expected to happen especially for desktop GPU segment, where PC suppliers, supply chain in Taiwan and China, and the semiconductor suppliers all gave relatively low expectation on next quarter’s sales. Part of NVIDIA Q1 sales growth that depended on furious cryptocurrency mining would not likely sustain as the regulatory risk and volatility of cryptocurrency are cooling the demand. In the market of gaming PC, NVIDIA faces the competition from AMD who is expanding GPU portfolio that caters to every price points and threatens NVIDIA’s dominance. Based on our fundamental and technical analysis, I take a hold position for the short-term stock performance and a buy position for the longer investment time horizon, which is mirrored by I Know First algorithm bullish long-term forecast.