Nvidia (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD), and Marvell Technology (NASDAQ:MRVL) were among the largest decliners among semiconductor stocks on Tuesday, despite the fact that the United States Senate advanced legislation to boost domestic semiconductor manufacturing amid concerns about competition from China. The law, adopted by the Senate 64-32, would provide the industry with $52 billion in domestic production subsidies and a previously announced investment tax credit for chip facilities worth an estimated $24 billion over the next decade, according to Reuters.
The plan also includes $200 billion in funding for scientific research over the next ten years. Senate Majority Leader Chuck Schumer stated on Tuesday that the funding package would be completed by the end of the week. Speaker Nancy Pelosi has previously voiced support for the bill so that it could be voted on this week. President Biden tweeted his support for the CHIPS Act, noting that it will help the United States compete with China. In mid-day trade, Nvidia (NASDAQ:NVDA) sank 2.5%, while AMD (NASDAQ:AMD), Marvell (NASDAQ:MRVL), and Qualcomm (NASDAQ:QCOM) all fell about 2%.
Other chip stocks that fell included Analog Devices (NASDAQ:ADI), Texas Instruments (NASDAQ:TXN), and Broadcom (NASDAQ:AVGO). Micron (NASDAQ:MU) and Intel (NASDAQ:INTC) both outperformed the market, rising slightly more than 0.5%. At the same time, NXP Semiconductors (NASDAQ:NXPI) climbed as well, boosted by solid second-quarter results and forecast. Benchmark began coverage of Marvell Technology (NASDAQ:MRVL) last week, calling the semiconductor company’s technology “important.”
Is Nvidia A Good Long-Term Investment?
Because of the company’s market leadership, NVIDIA is a good long-term investment. In the GPU AIB segment, NVIDIA has maintained and even increased its market advantage over Advanced Micro Devices (NASDAQ:AMD), as evidenced by the red line in the chart and the Radeon brand, during the last 15-16 years. This clearly shows that NVDA has a competitive advantage over its competitors.
For more than a decade, NVDA was the industry leader in GPUs. While history is not a perfect predictor, it is probably the best predictor of the future. NVIDIA is a good long-term investment based on the logical premise that the business will continue to dominate the GPU field for the next ten years, as it has in the past.
Can Nvidia Stock Continue To Grow?
NVDA can grow in the future, but the primary growth drivers for NVIDIA in the next decade will differ from the elements that drove NVDA’s growth in the previous decade. According to its 10-K filing, NVDA derived 46% and 40% of its fiscal 2022 (YE January) revenue from its gaming and data center industries. In comparison, the professional visualization, OEM & other, and automotive markets each contributed 8%, 4%, and 2% of the company’s FY 2022 revenue, respectively. NVIDIA’s revenue mix in ten years should be more balanced, with the automotive and professional visualization businesses expanding faster than the core data center and gaming markets.
According to a September 17, 2022 research report from technology research firm Omdia, “vehicles with Level 3+ autonomous systems” will see “wider adoption in mature markets” in 2030. In other words, the turning point for NVDA’s automotive market revenue is unlikely to occur for another ten years. Nvidia’s automotive revenue was less than 5% of the gaming market’s sales in FY 2021. Still, the business predicts that the automotive TAM (Total Addressable Market) is three times that of the gaming market’s TAM. Furthermore, NVDA has already established a substantial presence in the automotive business, revealing at its 2022 Investor Day that it has “won designs in 20 of the top 30 EV car OEMs.”
The Omniverse corporate software is expected to be a major growth driver in the professional visualization market during the next decade. At its 2022 Investor Day, Omniverse was defined as “a simulation engine for physically accurate virtual worlds and digital twins.” NVIDIA’s Q1 FY 2023 earnings call on May 25, 2022, only “10% of the world’s top 100 corporations” currently employ NVDA’s Omniverse corporate software.
This points to much room for growth in the adoption rate of the Omniverse enterprise software among corporations in the long run. As revealed at the company’s Q1 FY 2023 investor briefing, Amazon (NASDAQ:AMZN), PepsiCo (NASDAQ:PEP), and Kroger (NYSE:KR) are among the companies that have used NVDA’s Omniverse enterprise software in the area of digital twins. A recent March 2022 market research report published by Grandview Research forecasted that the worldwide digital twin market will grow by an impressive +39.1% CAGR for the 2022-2030 period.
In a nutshell, NVIDIA should maintain positive growth momentum in the next ten years, with the professional visualization and automotive markets being critical drivers of NVDA’s growth in the long run.
Featured Image: Megapixl © Softdreams
