Nvidia (NASDAQ:) operates worldwide as a visual computing company.

It operates in two segments: Graphics, and Compute & Networking. Graphics includes GeForce GPUs that can be used for gaming, PCs, as well the GeForce Now game streaming service, infrastructure, and other solutions.

The Compute & Networking segment offers data center platforms and systems for artificial intelligence (AI), HPC, and accelerated computing, autonomous vehicle solutions, and much more.

Nvidia has become an essential business due partly to its huge chip shortage. The company generates outstanding free cash flow and expands into new areas such as AI or autonomous cars, despite temporary supply chain disruptions.

I’m bullish about NVDA stock. (See Nvidia stock charts on TipRanks)

Indispensable Technology

Nvidia technology has risen from a graphic chip and integrated circuit maker for gaming in 1993, to an industry juggernaut that is indispensable to our connected world.

Time magazine named Jensen Huang CEO to its 100 Most Influential People list. Nvidia technology is used by 342 of the 500 top supercomputers worldwide.

There are risks with NVDA stock. The company derives some revenue from cryptocurrency mining GPUs. The revenue stream can be impacted by regulations or value pullback.

The next step was that gaming activity increased dramatically during the pandemic. The increase was fueled by lockdowns and the closure of other activities. Many believe that the rise will continue, but there’s a possibility of lower demand as the country reopens fully.

Profits, Free Cash Flow

Nvidia posted terrific numbers in Q2 FY22. Top-line revenues of $6.51 Billion were 68% higher than the previous year.

The gaming revenue grew by 85%. This was in addition to the impressive company profitability.

GAAP operating income was $2.4 billion, which is 38% of the operating margin. The total operating margin in the first six months fiscal 2022 was 46%, compared to 39% the previous year.

This profitability shows the firm’s wide pricing moat and price power. The company’s strong showing led to $2.7B in cash flows in Q2. NVDA shares trade at a forward ratio of 44.8 to its earnings. This ratio is normal for an tech company that has high growth and high margins in today’s market.

Nvidia’s cash and short-term investments have increased to more than $19 million thanks to these impressive results. The company’s debt-to-asset ratio is 0.45.

This is vital as Arm is still pending acquisition. It will include cash of $12 billion and stock of NVDA Stock worth $21.5 billion. In addition to any other compensation, it is also expected that Arm would be acquired.

The acquisition would allow NVDA, an AI company to be a global leader in computing. This acquisition must be completed by the end of 2022.

Wall Street’s Take

Wall Street analysts are extremely bullish on NVDA stock, with a Strong Buy consensus rating, based on 23 Buys, one Hold, and one Sell.

The average Nvidia price target of $238.81 implies 14.2% upside potential.

Summary on Nvidia

Nvidia has steadily grown and innovated into becoming a technology company that the world could hardly do without.

The company has seen huge demand and has been able to capitalize on it with cash flow and profitability.

The Arm acquisition represents a significant step in NVDA’s rise within the AI sector. Investors may see a potential opportunity in the stock’s recent fall from highs.

Disclosure: Bradley Guichard held a position at NVDA as of the publication.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. The article does not constitute a solicitation or recommendation to buy or sell securities. This article is not intended to provide advice on legal, financial and/or investment matters. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the article’s content. You are responsible for your actions based upon the articles. TipRanks’ or any affiliates does not endorse this article or make it a recommendation. The past performance of TipRanks or its affiliates is not an indication of future prices, results, or performances.