Nvidia’s stock is at a stratospheric high — these five catalysts could propel it higher

With a astir $750 cardinal valuation, the tech banal is valued astatine much than megabank JPMorgan Chase & Co. JPM, -0.76% and is 1 of the apical 10 components successful the benchmark S&P 500 Index SPX, -0.35%. That maturation has happened successful the blink of an eye, too, with shares rising astir 10-fold since the extremity of 2018. The momentum hasn’t slowed, either, with shares astir doubling successful the past six months. As a result, the company’s price-to-earnings (P/E) ratio is implicit 100, astir 5 times that of the S&P 500.

It’s tempting to wonderment erstwhile the tally volition travel crashing to a halt arsenic the adjacent disruptor comes along. But a person look shows Nvidia is dominating a fig of high-growth trends that could support it moving higher for immoderate time.

Omniverse and VR

Nvidia announced this week it is rolling retired respective products that volition springiness developers tools to physique virtual worlds arsenic portion of its Omniverse Enterprise platform.

Lest you deliberation this is conscionable astir making a amended Beat Saber, this isn’t conscionable amusive and games — virtual visits to occupation sites oregon 3D renderings of caller products tin assistance each mode of businesses thrive successful an property wherever distant workforces are progressively becoming the norm. There’s besides the imaginable necktie successful to the monolithic effort nether mode astatine Meta Platforms Inc. FB, -0.96% (Facebook) to look beyond societal media to a much immersive experience.

Grandview Research has estimated that the VR marketplace was valued astatine conscionable nether $16 cardinal successful 2020 but should turn astatine astir 18% annually done 2028 — much than tripling successful size implicit that play to implicit $59 billion. As 1 of the starring providers of some hardware and bundle successful the space, investors whitethorn privation to stake connected Nvidia gobbling up the bulk of that precise lucrative pie.

Artificial intelligence

While Nvidia’s roots are successful creating next-generation graphics, the company’s innovative graphics chips besides powerfulness artificial intelligence. That whitethorn dependable obtuse, but the improvement known arsenic “GPU acceleration” involves utilizing a high-powered graphics processing portion instrumentality connected immoderate of the astir time-consuming and data-intensive portions of a computing process.

Obviously, heavy learning happens champion — oregon lone happens astatine each — erstwhile monolithic amounts of information are enactment done an algorithm. And akin to its omniverse offering, Nvidia has joined hardware and bundle to connection effectual artificial quality solutions — including an end-to-end robotics level called Isaac that allows firms to input data, simulate and bid an AI system, past deploy the exertion successful the existent satellite with velocity and flexibility.

You’ve astir apt heard that 90% of the world’s information was created successful the past twelvemonth oregon two. But dissimilar astir tech stocks, Nvidia isn’t conscionable charging you to store oregon entree information — it’s charging up to find effectual ways for companies to usage that information via artificial quality and instrumentality learning.

Autonomous vehicles

A circumstantial illustration of AI that warrants its ain introduction connected this database is the inclination toward self-driving cars. Because it’s 1 happening to conscionable crunch data, and a full different shot of wax to usage AI to support a 4,000-pound conveyance from crashing into a pedestrian astatine 60 miles per hour.

The committedness of self-driving cars volition lone beryllium realized erstwhile the exertion is safe, and that demands hundreds of precision sensors astir a conveyance to observe everything from the lines connected the roadworthy to a pedestrian crossing the street. Nvidia has the computing powerfulness broadside covered arsenic good arsenic the hardware side.

Consider that its Drive exertion offerings see cameras, radar and ultrasonic sensors, on with processing chips and a “data halfway connected wheels” to woody with each those inputs. If and erstwhile self-driving cars deed the roads en masse, each conveyance volition request dozens of these pieces of hardware — and arsenic successful different areas, Nvidia is emerging is an aboriginal person successful this market.

Crypto mining

This is simply a sticky taxable for Nvidia, arsenic the institution has publically moved to trim the usage of immoderate graphic chips successful the abstraction by putting a headdress connected definite GPU functions utilized chiefly by cryptocurrency miners. But it isn’t giving up connected this conception by immoderate stretch, including launching its CMP HX — abbreviated for crypto-mining processor — earlier this year.

Say immoderate you volition astir cyptocurrency volatility oregon the likelihood of bitcoin BTCUSD, -0.08% oregon ether ETHUSD, -0.13% ever genuinely overtaking cold, hard cash. But the world is that mining crypto is highly lucrative, and based connected existent trends could beryllium taking disconnected arsenic we participate 2022.

Consider data from The Block, a integer assets quality and probe site. In October, miners made $1.72 cardinal successful gross by producing the assorted cryptocurrencies that are successful favour close now. Last twelvemonth that mining gross full was hardly much than $350 million, meaning a astir five-fold summation implicit the past year.

When mining is this profitable, you tin beryllium definite immoderate of those profits volition get plowed backmost successful to hardware.

Dividends and buybacks

What? I ne'er said they each had to beryllium high-tech catalysts. And the information remains that portion Nvidia’s banal marketplace valuation has exploded successful the past respective years, its dividend and buyback actions person not kept step.

Adjusted for splits, Nvidia started paying dividends of 1.875 cents per 4th backmost successful 2012 erstwhile it traded for $3 a share. While its banal terms has accrued 100-fold, the dividend stands astatine lone 4 cents a quarter. Or looked astatine different way, successful fiscal 2012 it recorded astir $4 cardinal successful gross and operating income of conscionable nether $650 million. Fiscal 2021 should boast $25 cardinal successful gross and much than $4 cardinal successful nett income.

Now instrumentality buybacks. Beginning with its archetypal repurchase programme successful 2004 done this summer, Nvidia spent astir $7.08 billion buying backmost its stock. But arsenic of Aug. 1, Nvidia was authorized to acquisition up to $7.24 cardinal successful communal banal done the extremity of 2022, according to its past net report. That means it could bargain much banal successful the adjacent twelvemonth than it has bought successful the full beingness of being a nationalist company.

These whitethorn not beryllium arsenic sexy arsenic caller merchandise lines, but could inactive beryllium important drivers of worth to Nvidia stockholders successful the future.

Jeff Reeves is simply a MarketWatch columnist. He doesn’t ain immoderate of the stocks mentioned successful this article.