Nvidia NVDA has gained more than 74% year-to-date, and the red-hot graphics chip manufacturer has easily emerged as one of Wall Street's most popular stocks. As shares sit comfortably near their all-time high, many investors are debating whether Nvidia can break even higher-while some are still wondering how the company managed to hit this new peak in the first place.
For years, Nvidia has been a leader in the production of graphics processing units (GPUs). These high-powered chips are designed to facilitate the creation of images in a frame buffer, and in recent years, GPUs have been the go-to choice for people working with complex algorithms and large chunks of data.
This tiny piece of technology packs a serious punch, and its uses are growing nearly every day. For example, demand for GPUs from cryptocurrency miners has picked up lately. As the prices of digital currencies like bitcoin and ethereum have soared, miners have scrambled to build powerful machines that are capable of mining these coins.
But cryptocurrency mining is unlikely to be a major long-term growth driver for Nvidia. Instead, the company is focusing on a few core industries-each with booming addressable markets-that it is already dominating. And as management showed in a recent shareholder presentation, these core industries still have plenty of potential:
(Source: Nvidia )
Video gaming has always been Nvidia's bread and butter, as the company's GPUs are the perfect tool to deliver great performance at a reasonable price. Gaming is the world's largest entertainment industry, and Nvidia says that its products are in the hands of about 200 million gamers right now.
In its recent presentation, Nvidia also mentioned that the rising popularity of esports will expand its potential market, and the company noted that new AAA titles-as well as HDR, 4K, and VR-are helping to drive demand for powerful chips (also read: Esports Is The Next Billion Dollar Industry: 3 Stocks to Watch ).
On top of this, Nvidia has become perhaps the most popular AI pick on the market. We're just now entering the early days of the artificial intelligence revolution, and Nvidia has already developed an end-to-end AI platform, funded AI research, and worked to define industry-wide standards.
Nvidia has also created the CUDA programming model, which has allowed the GPU to act as a general purpose computing tool. Specifically, Nvidia's own line of Volta GPUs provide the performance needed to tackle constantly evolving algorithms and applications.
In a similar vein, Nvidia stands to dominate the booming self-driving car industry. Of course, Nvidia is the furthest thing from a car company, but its image processing power is exactly what is needed to fuel the autonomous driving vision technology.
According to Nvidia's presentation, 225 companies are now developing with its DRIVE PX platform. Nvidia also has distinct partnerships with several automotive behemoths, including car companies like Tesla TSLA and Toyota TM , as well as suppliers like Autoliv ALV and Bosch.
Without a doubt, the gaming, AI, and self-driving car industries are what has gotten Nvidia this far. But more importantly, these budding markets hold the key to the company's future. Investors should look for Nvidia to continue to grow alongside these new trends.
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