Bullish on Nvidia: No Debt and Low Expectations

If you're looking for a quick, high risk bet, check out Nvidia (NVDA). They release earnings after the close today. I now own over 600 shares at a purchase price of around 11.10. Although both AMD and Intel are going after NVDA's turf, NVDA has no debt and its competitors have been trying to muscle into the high-end GPU business for years, without success.

In addition, Intel's Larabee won't be released till 2009, meaning NVDA needs to duke it out only with AMD/ATI for X-Mas laptop and desktop sales. Bottom line: from my vantage point, NVDA stock looks oversold at 11 dollars a share.

I don't expect NVDA to go above $13-15 in the near term because whenever Intel enters a market, a rough road lies ahead for everyone else. For now, the only real competitor is AMD, with its ATI GPU chips; however, AMD/ATI chips have a reputation for poor quality here in Silicon Valley, whether deserved or not, so NVDA probably isn't concerned about ATI.

Right now, I am captivated by the siren songs of value investors: one, no debt; and two, very low expectations.

Disclosure: Long NVDA

Comments

[Wefwef:]

ATI HD 4870X2 just released today for rave reviews, 2 GPU's on one card, Nvidia has nothing comparable. Besides more troubling news about Nvidia chips blowing up. Very risky play with current outlook. Expect ATI to bring more success stories to table probably helped by design advantages from AMD's cpu team (Nvidia hasn't one).

2008 Aug 12 03:42 PM

[Randy Fay:]

I can't imagine investing in AMD over NVDA. Fundamentals actually look pretty decent for NVDA. BUY.

2008 Aug 12 08:21 PM

[Todd L:]

Looks like Matt was right. Up 10% after hours on earnings that were nothing special. Low expectations was the key.

Also, NVDA announced a $2.7B share repurchase program. Thats something like a third of the market cap! Nifty!

2008 Aug 12 10:04 PM