The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Nvidia Stock Forecast

Summary:

Gaming is the main income/revenue generator of Nvidia.

AMD’s recently released Vega flagship GPU products still can’t match the flagship GTX 1080 Ti product of Nvidia.

Nvidia therefore will continue to dominate high-end/enthusiasts discrete video card sales.

The post-earnings dip of NVDA was due to profit-taking and geopolitical tensions between the U.S. and North Korea.

The long-term bull case for Nvidia remains valid. I Know First has positive near, intermediate and long-term algorithmic forecasts for Nvidia.

Nvidia (NVDA) failed to hit $175 last week. However, it did post a new 52-week high of $174.56 before it did its earnings report last Thursday. In spite of the big beat on EPS and revenue estimates, geopolitical tensions (between the U.S. and North Korea) and profit-taking are likely the reasons why NVDA dipped post-earnings. NVDA is trading below $170 again after it went down as low as $155 last Friday. It only means investors are again buying NVDA. They believe Nvidia’s growth momentum is still intact for the long run.

Another catalyst for Nvidia’s trend going back above $170 price level is that the flagship Vega GPUs of Advanced Micro Devices are still sub-par compared to the latest GeForce GTX 1080 Ti GPU (Graphics Processing Unit). Meaning AMD is only competing against last year’s Nvidia GTX 1070 and GTX 1080. AMD still has no equalizer to Nvidia’s current flagship, the GTX 1080 Ti (released earlier this year).

(Source: Reddit/legitreviews.com)

As you can see from the chart above, AMD’s Vega 64 GPU’s gaming performance rating is still notably lower than Nvidia’s GTX 1080 Ti’s. This should help Nvidia prolong its almost-monopoly on high-end discrete video cards.

AMD’s failure to compete with the Pascal GTX 1080 Ti is why Nvidia is in no hurry to release its next-generation Volta discrete video cards for consumers.

PC Gamer also tested AMD’s latest Vega GPUs and the results are below. AMD still has a long way to go before it can catch up with the high-end GPUs of Nvidia. Going forward, Nvidia is one-generation ahead of AMD in high-end GPU designs. AMD will only probably be able to release an equalizer to the GTX 1080 Ti by next year. By that time, Nvidia will probably release it Volta GPUs – which will again beat the performance of AMD’s 2018-era GPUs. This one-step ahead advantage of Nvidia on discrete video cards is why investors should hold on to their NVDA shares.

(Source: PC Gamer)

Nvidia Will Keep Dominating The High-end GPU Market Segment

The Vega 56 and Vega 65 will only probably help AMD take away some market share in mid-range discrete video cards. It will not really threaten Nvidia’s high-margin GPU sales to high-end/enthusiasts market. The $30 billion/year PC gaming hardware market is dominated by high-end products sales. This is where the GTX 1080 Ti shines.

(Source: Jon Peddie Research)

As of Q1 2017, Jon Peddie Research estimated that Nvidia still owns the 72% share of the discrete video cards global market. AMD’s inability to match the GTX 1080 Ti fortified Nvidia’s tight grip on the high-end GPU market. The Vega 56 outperforms last year’s GTX 1070. However, Nvidia can just issue a GTX 1070 Ti version later this year and it will again dominate the mid-range GPU market segment.

Nvidia has released an entry-level GTX 1050 Ti. I expect it to also Ti versions of the GTX 1060 and GTX 1070. Nvidia has the money and brand power to match the entry-level and mid-range discrete video card products of AMD. It needs to do this to protect its 72% market share in global sales of discrete GPUs.

Conclusion

The geopolitical tensions between the U.S. and North Korea are cooling down. Semiconductor firms like Nvidia are likely to rally again. I am therefore re-endorsing a buy rating for NVDA and AMD. These stocks were badly beaten down last week at the height of bellicose statements from President Trump and North Korean leader, Kim Jong-un. Now that these politicians have toned down their rhetoric, markets should start getting more bullish again.

As long as Nvidia hold more than 70% share of the discrete video card global sales, its growth story remains true. It is always safer for investors to put more importance on the performance of Nvidia’s Gaming business segment. The Datacenter business is still much smaller. As long as Gaming keeps delivering double-digit year-over-year growth in revenue, NVDA remains a strong buy for long-term growth investors.

(Source: Nvidia)

Gaming’s Q2 FY18 revenue of $1.186 billion is 51.8% higher year-over-year. That’s a big thumbs-up from customers who prefers Nvidia’s GPUs when it comes to high-end gaming performance.

I Know First shares my bullish outlook for NVDA. Nvidia has positive/bullish algorithmic market trend forecasts from I Know First.

Past I Know First Forecast Success with NVDA

I Know First’s algorithm has made accurate predictions on NVDA in the past, such as its bullish article published on October 25th, 2016. In the article, it explains that the Nintendo Switch will most likely be big hit when it is released next year. The thought of Nvidia garnering new revenue of $125 million/quarter supplying custom chips to the Nintendo Switch is long-term tailwind. During the period of time from October 25th, 2016 to August 15th, 2017, NVDA shares increased by 136.15% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: NVDA)

This bullish forecast for NVDA was sent to I Know First subscribers on October 25th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.