The Nvidia Story Sounds Positive, But Risks Exist For Investors

Sep.19.13 | About: Nvidia Corporation (NVDA)

NVIDIA Corporation (NVDA) has worked hard to diversify its product portfolio, which enhanced its growth opportunities. The stock has benefited from its innovative products and powerful deals in China, and Nvidia's Tegra 4 model will launch with China Mobile this October, but with the stock trading near a 52-week high, is NVDA a buy or a sell?

Nvidia has is making up for lost ground with new deals in China. After Google Inc. (GOOG) replaced Nvidia's Tegra4 processor with QUALCOMM's (NASDAQ:QCOM) processor in its Nexus 7, things did not look good for Nvidia. Microsoft Corporation (MSFT) Windows RT included the Tegra4 processor but the product did not do well, after high expectations. Finally, Nvidia found a successful vehicle for its Tegra4 processor in Xiaomi's mobile devices. Xiaomi produces the best selling smartphone in China, and is one of China's most innovative mobile device makers.

Even more impressive is that Xiaomi is out selling Apple Inc. (AAPL) in China. Just two years after its inception, the company intends to sell 15 million devices this year in China. MiPhone 3 offers the choice of Tegra or Snapdragon processors. The Qualcomm Snapdragon 800 version debuts with China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA), while the Nvidia Tegra 4 model will launch with China Mobile (NYSE:CHL), the world's largest carrier. Claimed to be the world's fastest mobile processor, Tegra 4 offers record levels of performance and battery life. This kind of innovation is a big reason why the stock is trading at yearly highs, and according to the Stock Traders Daly trading report, NVDA is close to testing long-term resistance, but that does not necessarily make it a buy.

The company offers more innovation with its Tegra 4i, which is Nvidia's first fully integrated 4G- LTE mobile processor. 4G-LTE is the future of wireless connectivity for mobile devices, especially smartphones. Of the various technologies that are driving the market currently, LTE is seeing the strongest growth, as carriers around the world increasingly shift to the new standard for wireless communication.

Additionally, Nvidia recently announced its next generation Tegra mobile processor, code-named Logan. The company promises that the new mobile graphics processor will be more powerful than the PS3. Mobile devices using Nvidia's new chip are expected to start shipping by mid-2014. The company's recent development of Project SHIELD, an Android gaming device featuring the Tegra 4 processor, is a new addition to the gaming world that helps users enjoy the digital content in the cloud.

The Tegra platform could be the most important revenue stream for Nvidia over the next few years, and Nvidia seems to be well positioned with a good mix of new innovative products, but that does not necessarily mean the stock is going higher from here. Stock Traders Daily has NVDA neutral long-term, and it is close to a test of long-term resistance. So far, resistance is holding, and as long as the stock remains below resistance, as defined in our real time trading report, Stock Traders Daily expects lower levels and a test of support.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: By Neal Rau for Stock Traders Daily and neither receive compensation from the publicly traded companies listed herein for writing this article.