NVDA Stock – What Investors Should Know About NVIDIA Corporation
- Graphics Segment – GeForce graphics processing units (GPUs) for gaming and PCs. GeForce NOW is for game streaming service and related infrastructure and solutions for gaming platforms. Also, Quadro/NVIDIA RTX GPUs are for enterprise workstation graphics. Virtual GPU software is for cloud-based visual and virtual computing. Automotive platforms are available for infotainment systems. And, Omniverse software is used for creating three-dimensional (3D) designs and virtual worlds.
- Computation & Networking Segment – Data Center platforms and systems for artificial intelligence (AI), high-performance computing (HPC), and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors (CMP); Jetson for robotics, and NVIDIA AI Enterprise are all part of the Compute & Networking segment.
NVDA Stock: Annual Reports – Financials – SEC Filings
Nvidia Corp (NVDA Stock Ticker) is incorporated in the state of Delaware. Nvidia Corp is primarily in the business of semiconductors & related devices. For financial reporting, their fiscal year ends on January 30th. This page includes all SEC registration details as well as a list of all documents (S-1, Prospectus, Current Reports, 8-K, 10K, Annual Reports) filed by Nvidia Corp.
Nvidia is a leading designer of graphics processing units that improve the computing experience. The company’s chips are used in a wide range of applications. For example, high-end gaming PCs, data centers, and automotive infotainment systems. In recent years, the company has shifted its focus away from traditional PC graphics applications like gaming. Instead, moving toward more complex and lucrative opportunities like artificial intelligence and autonomous driving. These newer applications take advantage of the high-performance capabilities of the company’s graphics processing units.
NVDA Stock – Risk Factors
- Earnings Forecast – Earnings are forecast to grow 25.13% per year
- Historical Earnings – Earnings have grown 25% per year over the past 5 years
Negative Risk Factors
The company relies on third parties and their technology to manufacture, assemble, test, package, or design its products. This limits control over product quantity and quality, manufacturing yields, product development, enhancement, and delivery schedules. Ultimately, this reliance could harm the business. NVIDIA does not produce the semiconductors used in its products. Nor, does it own or operate a wafer fabrication facility. As a result, the company relies on foundries to produce semiconductor wafers using their fabrication equipment and techniques. NVIDIA does not assemble, test, or package products themselves. Rather, the company hires independent subcontractors to do so. Moreover, third-party software development tools are used to help with the design, simulation, and verification of new products or product enhancements.
Supply Chain Risk
There is constant pressure on design requirements to meet consumer demand for more functionality from products. Customer functionality expectations may exceed the capabilities of currently available software development tools. The company makes long-term supply and capacity commitments. Yet, it may not be able to secure enough capacity commitments to meet business needs. NVIDIA faces a number of risks that could jeopardize its ability to meet customer demand and scale its supply chain. This could have a negative impact on longer-term demand for products and services. It could also negatively impact business operations, gross margins, revenue, and/or financial results.
International Operations Risk
The company is subject to the risks and uncertainties that come with international operations. Adverse economic conditions could harm the company’s operations and financial performance. NVIDIA conducts business and has offices all over the world. Third parties located outside of the United States manufacture, assemble, test, and package its semiconductor wafers. The company generated 84% of its revenue for the fiscal year 2022 from sales outside of the United States. This global nature exposes the company to a number of risks and uncertainties. In turn, these conditions could have a material adverse effect on its business, financial condition, and operating results.
Defects – Malicious software attacks – Warranty Risks
If products have significant flaws, the company may incur significant costs to correct them. Moreover, the company’s reputation may suffer, and it may lose market share. NVIDIA’s hardware and software product offerings are complex. As a result, they may contain flaws or security vulnerabilities. Or, they may fail to perform adequately due to a variety of issues in design, fabrication, packaging, materials, or use. As products are introduced into new devices, markets, technologies, and applications, or as new versions are released, these risks may increase. Some errors in products or services may not be discovered until after they have been shipped or used.
Undiscovered flaws in products or services may expose end users to unscrupulous third parties who develop and deploy malicious software programs that could attack these products or services. Defects or failure to perform to specifications could result in significant damage to the products or the product into which our device has been integrated. Any such defect may result in significant warranty, support, and repair. Or, replacement costs as part of a product recall or otherwise, as well as a write-off of the value of related inventory. Moreover, it would divert the attention of engineering personnel from product development efforts to find and correct the issue.
Continued Brand Acceptance
After commercial shipments begin, an error or defect in new products or releases, or related software drivers, could result in failure to achieve market acceptance. This could result in a loss of design wins and harm relationships with existing and prospective customers and partners. Also, consumers’ negative perceptions would have an impact on business operations, gross margin, revenue, and financial results. Moreover, the company may be required to reimburse customers, partners, or consumers for costs incurred in repairing or replacing products in the field. Facing a product liability claim, the cost of defending the claim could be significant. Moreover, it would divert the efforts of technical and management personnel and harm business. Furthermore, commercial liability insurance may be insufficient. Or, future coverage may be unavailable on acceptable terms. Any of these factors could have a negative impact on financial results.
NVDA Stock in the News
NVDA Stock Co-Founder exercised options to buy US$26m worth of stock (October 2022)
Jen-Hsun Huang exercised options to buy 230k shares at a strike price of around US$3.16, on October 11, 2022. Exercising the option cost a total of US$724k. This transaction represented less than 1% of Jen-Hsun’s direct individual holding at the time of the transaction.
- Since December 2021, Jen-Hsun’s direct individual holding has increased from $84.25m shares to $85.79m.
- However, company insiders have collectively sold US$506m more than they bought, via options and on-market transactions in the last 12 months.
Is NVIDIA (NVDA Stock) Using Too Much Debt?
In general, debt becomes a real issue when a company cannot easily pay it off. Either through raising capital or through its own cash flow. NVIDIA had a debt of US$10.9 billion at the end of July 2022, down from US$11.9 billion a year earlier. However, it also has US$17.0 billion in cash, resulting in a net cash position of US$6.09 billion. According to the most recent balance sheet, NVIDIA had liabilities of US$7.57 billion due within a year. Also, liabilities of US$12.1 billion are due after that. To offset these obligations, it had cash of $17.0 billion and receivables of $5.32 billion due in the next 12 months. As a result, it has $2.73 billion in liquid assets that exceed total liabilities.
Given NVIDIA’s size, it appears that its liquid assets are well balanced against its total liabilities. Obviously, it’s unlikely that the US$290.5 billion company is cash-strapped. However, it’s still worth keeping an eye on the balance sheet. Simply put, the fact that NVIDIA has more cash than debt suggests that it can manage its debt responsibly. Also encouraging, NVIDIA increased its EBIT by 28% in the previous year. As a result, this should make it easier to pay down debt in the future. The balance sheet is the obvious place to start when analyzing debt levels. However, the future profitability of the business will ultimately determine whether NVIDIA can strengthen its balance sheet over time.
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