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What's going on?

Nvidia which makes computer chips for everything from gaming equipment to data storage announced leveled-up second-quarter results last week. Psst, Nvidia your joystick is showing

What does this mean?

The tech hardware giant trounced investors expectations, with sales up 50% on the same time last year, and profit up 76%. Put those high scores down to all the lockdowns thatve kept people at home: demand for data storage and computing equipment soared as bedrooms became offices, and for games consoles as weekends became something.


And Nvidia doesnt think itll be game over any time soon: the companys expecting a strong second half of the year for its gaming segment, thanks to Sonys soon-to-be-released PlayStation 5 and Microsofts Xbox Series X. That might partly explain why the companys revenue prediction for this quarter was 12% higher than investors were expecting.

Why should I care?

For markets: When the chips are up…


While US stocks have only risen 4% on average this year, Nvidias has doubled. Thats probably because its been reporting the kinds of positive sales trends other major companies could only dream of. Investors shouldnt necessarily expect its stock to keep rising, mind you. If you compare Nvidias share price to next years forecasted earnings per share, youll get a price-to-earnings ratio of 55 times. In other words, Nvidias share price is 55 times higher than the per-share profit its predicted to make next year. And if you compare that to US stocks roughly 20 times price-to-earnings ratio, you might be looking at a current valuation that already reflects a lot of future good news.



The bigger picture: All Merc, no play.


Nvidia also signed a deal with German car brand Mercedes-Benz last week: itll be incorporating its technology into every new Mercedes from 2024 onwards. As carmakers shift toward electric vehicles oh hey, Tesla and eventually toward self-driving cars, demand for computing power in cars is likely to keep rising, potentially to Nvidias benefit.

Originally posted as part of the Finimize daily email.

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