Nvidia Stock Is Not a Name to Trade, It’s One To Hold Forever

Stocks to buy

That’s right, I’m borrowing Jim Cramer’s famed line on Apple (NASDAQ:AAPL): “Don’t trade Apple, just own it.” That’s how I view Nvidia (NASDAQ:NVDA), although NVDA stock does tend to be a bit more volatile than Apple. 

Scorching Hot, Overvalued Nvda Stock Still Looks Like a Buy

Source: Sundry Photography / Shutterstock.com

Apple is the largest tech company in the world, but it was prone to wide swoons and big shifts in sentiment when Cramer coined the phrase several years ago.

For Nvidia though, I simply see too much long-term runway with this company to ignore it. 

The swoons in the stock price and sentiment have come, and will continue to come, with Nvidia too. While skillful investors can trade around it, I look at Nvidia as a core position just like many looked at Apple as a core position several years ago.

Apple now sports a $2.5 trillion market capitalization. That may be a bit high of expectations for Nvidia, but even with its $500 billion market cap, I think it still has upside. 

Backbone of Technology

Nvidia might be known for its GPUs and for its impact on the gaming industry. Obviously, gaming is a big part of Nvidia’s business and it’s what helped put it on the map. Similar things can be said of Advanced Micro Devices (NASDAQ:AMD). 

However, Nvidia’s GPUs aren’t just being used for computer graphics and gaming power. They are being used in all sorts of applications far larger than gaming.

Nvidia’s products are being used to power autonomous driving solutions for all sorts of different logistics companies and automakers. They’re being used in cloud computing, data centers, artificial intelligence and machine learning, drones, agriculture, energy, infrastructure, healthcare, super-computing and more. 

The list goes on and on.

The point is, it’s not just a few companies using Nvidia’s products. The company didn’t get to a $500 billion market cap by catering to just a few end markets — it caters to everyone. 

When thousands of companies, brands and technologies build their products and services on the back of Nvidia’s products, it makes the latter indispensable.

In that sense, Nvidia is becoming the backbone of countless technologies, businesses, services and products. That’s why regardless of market swoons or sentiment shifts, this is a name I want to continue to own. While its pending acquisition of Arm is expensive — at $40 billion — this too will grow Nvidia’s footprint and make it that much more indispensable.

Bottom Line on NVDA Stock

The main reason that I like NVDA stock is laid out above — it’s the backbone and pillar to so many current and future technologies. The other reason I like Nvidia? The way consensus estimates have been wildly conservative. 

The magnitude of the beats just keeps piling on both the earnings and the revenue side. Look at the last six quarters worth of earnings results: 

EPS Result EPS Estimate Beat
3.66 3.28 +0.38 (beat by 11.6%)
3.10 2.80 +0.30 (10.7%)
2.91 2.56 +0.35 (13.7%)
2.18 1.96 +0.22 (11.2%)
1.80 1.68 +0.12 (7.1%)
1.89 1.68 +0.21 (12.5%)

On the revenue front, it’s a similar situation. Only expectations have been drastically behind. At the start of 2020 — in other words, before Covid — analysts’ were expecting about $10.8 billion full-year sales. The company did $16.67 billion. 

At the start of 2021 — in other words, well into Covid — consensus expectations called for full-year sales of roughly $16.5 billion. Those estimates now sit at about $25 billion.

Friends, the numbers don’t lie. It’s clear that Nvidia is outperforming even the rosiest of expectations.

In that sense, the company’s results are several years ahead of where the market was expecting. That helps explain why the stock exploded higher and why each dip has been a gift for long-term bulls

Trading Nvidia

While the move has been strong, keep in mind, the stock consolidated for almost a year before the recent rally.

This rally was coming eventually. We will continue to remain long NVDA stock as the company continues to outperform. 

As for the technicals, Nvidia’s looking pretty good. Shares climbed up to $208.75 in early July before suffering a quick pullback. However, that pullback was a buying opportunity in NVDA stock, as shares are now back above $200. 

From here, let’s see if the stock can take out its highs near $209 and continue to push higher. If so, the $225 to $227 area may be in play for NVDA stock. That’s about where the 161.8% extension comes into play. 

Otherwise, let’s look for a dip to the 50-day moving average as a buying opportunity. Below that and the recent low near $180 may be on the table. Again, NVDA stock is a name I want to own, with or without timing its price movements. 

On the date of publication, Bret Kenwell held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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