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Investors who follow the technology industry closely have likely heard a lot about the graphics processor maker NVIDIA Corporation (NASDAQ: NVDA) over the past few years. That may be because the company's shares are up more than 950% over the past three years, and because it's benefiting from the growth of emerging technologies including artificial intelligence (AI) and autonomous vehicles.
Seeing a stock make massive gains from opportunity in new tech trends is enough to make any investor sit up and take notice. But it takes far more for a company to be a great long-term investment than quick share price gains and a few bets on emerging trends. Fortunately, NVIDIA's stock is also rising due to the company's dominance in key industry segments and early wins in prospective markets.
Image source: NVIDIA.
Why investors should consider NVIDIA's stock
First and foremost, potential NVIDIA investors should know that the company's primary business is in selling graphics processing units (GPUs) for the gaming market. In the most recent quarter, NVIDIA earned nearly 58% of its top line from this segment.
NVIDIA competes mainly against Advanced Micro Devices (AMD) in this space, but it maintains a leadership position in what's known as the discrete desktop GPU market (graphics processors that handle the image-processing load on desktop computers). At the beginning of this year, NVIDIA held about 66% market share in discrete desktop GPUs, with AMD taking up the rest.
NVIDIA's gaming business not only holds a dominant position, but sales of its gaming GPUs are also growing quickly. Revenue in this segment was up an impressive 52% year over year in the second quarter of fiscal 2019.
Of course, gaming GPUs aren't NVIDIA's only opportunity. The company is also using its graphics processors to win business in the AI, data center, and autonomous vehicle markets. In fact, major tech companies -- including Facebook, Amazon, and Google -- already use some of NVIDIA's graphics processors to power their AI systems. About 1,200 companies use the company's AI inference tech, and management believes that the organization's total addressable market for artificial intelligence will be $50 billion by 2023. NVIDIA is already tapping into the AI market through its fast-growing data center segment, which saw its revenue jump 83% in the second quarter of fiscal 2019, and accounts for about 24% of the company's top line.
Finally, NVIDIA has a growing opportunity to benefit from the autonomous vehicle market. NVIDIA manufactures a driverless car supercomputer, called Drive PX Pegasus, which will soon be available to automakers to help create Level 5 self-driving vehicles. The company has been working on driverless car tech for several years, but I should point out that for now, NVIDIA earns just 5% of its total revenue from its automotive business segment.