Gaining 953% over the past three years is no mean feat, and yet here we are with a stock that is high-risk, high-gain, and possibly the most exciting tech stock outside the FAANG cohort. If you like investing in American stocks – and let’s face it, most Canadians have at least some exposure to our southern cousins – then you may want to take a look at one of the hottest semiconductor growth stocks around. The following stock is also a great buy for anyone looking to get in on the esports boom, which is likely to be worth $2 billion a year by 2020.
One tech stock to rule them all
Gaming, self-driving cars, artificial intelligence – they’re some of the most exciting areas of tech investment today, but what do they all have in common? Nvidia (NASDAQ:NVDA), that’s what. With just one stock, you can gain access to all of the above or see it as a pure play semiconductor pick.
But what’s Nvidia like on market fundamentals? If it’s anything like its FAANG cousins, it won’t be great, but let’s take a look.
Nvidia is overvalued by around 20% of its future cash flow value, which is not bad at all for a U.S. tech stock. Its market fundamentals are all pretty horrid, though: a P/E of 34.9 times earnings, PEG of twice growth, and bloated P/B of 17.1 times book. That’s pretty much what one might expect from a stock like Nvidia, but not to worry, because this isn’t one for value investors anyway.
Nvidia stock is high risk, but high gain
It’s also a great way to get exposure to a massive eSports boom that’s starting. As the world knuckles down for what could be a bumpy ride economically, cheap entertainment that can be had in the comfort of one’s own home is likely to be a big growth sector. That’s where gaming comes in, and especially esports.
Nvidia makes advanced graphics processing units (GPUs) used mainly in PC gaming, though other areas of involvement include machine learning, self-driving cars, and artificial intelligence (AI). While most of Nvidia’s current income is from the gaming industry, investors looking for a low-exposure route to the games market can do so with this stock while also diversifying by gaining entry to the aforementioned sectors.
The bottom line
If you like risky investments that pay off big time, then going for a tech stock like Nvidia is an exciting play. This stock is currently rising on the back of good news from its latest tech developments, proving that investors are moving with the market, and giving an indication of what can be expected in terms of momentum every time a big, newsworthy development is released.
While not one for value investors by any means, Nvidia is a buy for growth investors and gaming fans alike. It’s also a healthy alternative to those pesky FAANG stocks everyone seems to love so much, plus a good way to diversify a domestic-heavy portfolio that’s light on American exposure.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Nvidia.