Nvidia (NVDA -0.02%) is one of the most important tech companies to be watching right now. Not only is the company, which is known for semiconductors and GPUs, in the top range of semiconductor companies -- it's one of the world's top ten most valuable companies by market cap.
This week, Nvidia reported earnings which beat expectations, contrasting with recent bad news putting pressures on its stock price. Currently, the stock price is down by about 18%, recovered partially from the lowest level of this year -- over 25% -- as reports emerged Nvidia would be abandoning a planned acquisition of chipmaker Arm after running into regulatory issues.
However, losing out on Arm isn't something that will permanently negatively impact Nvidia. Nvidia is a successful company putting out high quality products in its existing main operation (gaming) that is also an innovative company with opportunities for growth outside of gaming PC hardware.
Image source: Getty Images.
The star of the show
Nvidia's core product is GPUs, which are considered some of the best or the best on the market, depending on who you're talking to. The ongoing chip shortage has affected supply so badly that Best Buy (BBY -0.11%) days ago placed an in-demand Nvidia graphics card behind a $199 paywall (the cost of its Totaltech membership) -- though some people certainly made back that cost by reselling the cards.
However, Nvidia has its sights set on more than the gaming PC space. In January, the Meta (META -1.16%) Research Supercluster selected Nvidia to partner on an AI research supercomputer, and Jaguar Range Rover in February announced all new vehicles will be built with Nvidia AI starting 2025.
Looking towards the future with AI
Nvidia is moving from being a hardware company to being a hardware and software company with AI solutions. Its hardware experience sets it up well, but this is where the competition comes in. Other companies are aiming to dominate the intersection of chips and AI as well, including industry heavyweights like Apple (AAPL 0.20%) and Intel (INTC -0.65%), plus more chip-focused operations like AMD (AMD -4.31%).
Nvidia has forecasted the chip shortage will ease up in the second half of this year. However, while the state of the supply chain can be forecasted, it can't be predicted with total certainty, due to the general unpredictability of the pandemic. Depending on how the supply chain situation evolves, it may be more advantageous to invest in Apple and Intel, which have more significant amounts of their business in other products and services.
Supply chain issues have impacted many lives during the pandemic. From toilet paper shortages to empty car dealership lots, they've caused countless problems. The chip shortage is especially important, due to the fact that these products are responsible for the function of so much technology. Nvidia demonstrates leadership in this important space, as well as growth potential with its diversification into AI. The business is innovative and backed by strong consumer demand indicating the high valuation is stable despite recent bad news.
