Nvidia (NASDAQ: NVDA) enjoyed an uninterrupted uptrend for much of 2018, but the sharp selling in the last week could put pressure on the stock.
Nvidia, whose P/E is 41 times, deserves the premium. Its EPS grew nearly 40% in the last five years. Its earnings will grow 17%, at least, in the next five years. This year, EPS will grow at 80%. Still, the RTX 2080 GPU release is not getting favorable reviews. Tech sites write that the card is not worth the extra money because it is only marginally faster than the current-generation GTX 1080-level cards.
Fundamentally, Nvidia’s platform-based approach for accelerating its market share in computing will pay off. The addressable market in data center ($50 billion) and autonomous driving ($60 billion) will add to the future growth for the company. But its core GPU market must not alienate its user base.
Ray-tracing is at the heart of RTX gaming. By bringing more realistic lighting and shadows, games will bring a better experience. Nvidia had not expected to bring this technology for another 10-15 years. Now that it is in the 2080 Ti, 2080, and 2070, gamers have something to look at buying.
For now, investors should look for game titles supporting ray-tracing and driving RTX card sales. Otherwise, the stock valuation could correct, creating a better entry point.
