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Nvidia Just Showed Why It Still Has More Room to Run in 2017

Nvidia (NVDA) was the best performing stock in the S&P 500 in 2016, gaining nearly 300%. As a result, nearly every portfolio manager and analyst is positive on the company, as its GPUs go into everything from artificial intelligence to machine learning to driverless cars.

After Wednesday's CES 2017 keynote address by CEO Jen-Hsun Huang, Wall Street might not be bullish enough.

In a wide ranging keynote address that kicked off the annual consumer electronics extravaganza in Las Vegas that touched on everything Nvidia is doing, Huang had something for all of its partners, its investors and the media that covers the company.

Perhaps the most impressive announcement was the ability to have high-powered gaming in the cloud, effectively making any PC or Mac a high-powered gaming machine that can run the latest and greatest video games. Bringing gaming to the Mac with GeForce Now, its cloud gaming service, should open a huge new market for Nvidia. Apple's Macs have traditionally never been good for gaming, which is the only area of the PC market that's experiencing growth, so this is a coup for Nvidia.

At $25 for 20 hours of gaming, it's a lot cheaper than plunking down $1,500 or $2,000 on an expensive gaming machine, especially if your existing PC or Mac is suitable enough for the rest of your computing needs.

This presents a huge opportunity for Nvidia. Right now, there are around 100 million high-end gaming PCs out there. With this announcement, the opportunity went up nearly 20 fold. "From a [total addressable market] perspective, the company is targeting emerging markets which addresses a 2.8B population (ages 18-40)," RBC Capital Markets analysts led by Mitch Steves wrote in a research note following the speech.

If that wasn't enough, the company's major announcement of a partnership with Audi to have driverless cars on the road by 2020 should whet investor's proverbial whistles.

In addition, Huang showed off Nvidia's new AI Car Platform, which it wants every car-manufacturer to use. Currently, Tesla (TSLA) is using Nvidia's chips for its self-driving system and we can expect many more car-makers to do the same thanks to Nvidia making it easier with its AI Car Platform.

Automotive could be a bigger opportunity for Nvidia than gaming, thanks to the opportunities in the digital cockpit (which represents a 20 million car or $2 billion opportunity per Steves), self-driving cars (15 million or $2 billion) and transportation-as-a-service (2 million or $2-$6 billion. Self-driving cars are coming and they're coming fast, all thanks to the computing power and artificial intelligence prowess that Nvidia's GPUs can handle.

There were several more announcements, including the smart home, but none of this is possible without the boom we've seen over the past couple of years in artificial intelligence and machine learning. Andreessen Horowitz analyst Benedict Evans has tweeted that the "Age of the GPU" started in 2015 and Nvidia is capturing every opportunity it can in these arenas.

With a presentation spanning nearly two hours and covering every white-hot topic in Silicon Valley, Huang showed off why Nvidia's GPUs are the apple of Silicon Valley's eye (pun intended) and will be for years to come.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.