NVIDIA Corporation (NVDA) Just Dropped a Wonderful Bombshell

But who will bite?
Unsurprisingly, industry analysts wasted no time chiming in, with Raymond James analyst Hans Mosesmann first addressing the Cupertino-based elephant in the room:

If there was ever a way for Nvidia to get into Apple Inc. (NASDAQ:AAPL), the IP licensing angle is likely it. This is particularly true if Apple Inc. (NASDAQ:AAPL) has ambitions in the datacenter (although nothing has been announced to date). In this case, licensed graphics from Imagination Technology (used by Apple Inc. (NASDAQ:AAPL), Samsung Electronics and Intel Corporation (NASDAQ:INTC) in mobile platforms) are not suitable in higher-end computing. This also could limit ARM Holdings plc (ADR) (NASDAQ:ARMH)‘s Mali effort, which is just starting to gain traction.

Meanwhile, Patrick Wang of Evercore Partners doesn’t “see licensing as a meaningful business of EPS contributor in the next few years,” and noted that Evercore’s checks already “indicate significant internal GPU design efforts [at Apple], perhaps looking to eliminate the royalty expense.”

Of course, as an NVIDIA investor myself, I certainly wouldn’t complain about the incremental benefits a deal with Apple or Samsung could offer, but that doesn’t mean NVIDIA Corporation (NASDAQ:NVDA) absolutely must make such a deal happen. Just last month NVIDIA turned in solid quarterly results, beating analyst estimates on both revenue and earnings per share, thanks largely to record GAAP and non-GAAP gross margins of 54.3% and 54.6%, respectively.

What’s more, NVIDIA boasts no debt on its balance sheet along with an almost ridiculous $3.7 billion cash pile, representing more than 40% of its current total market capitalization. It should also come as no surprise, then, that NVIDIA plans to use some of that cash to return at least $1 billion to shareholders this year in the form of dividends and share repurchases.

As a result, it’s safe to say today’s licensing announcement is simply icing on the cake for NVIDIA Corporation (NASDAQ:NVDA) investors, and I remain convinced the stock is a solid buy even near fresh 52-week-highs.

The article NVIDIA Just Dropped a Wonderful Bombshell originally appeared on Fool.com and is written by Steve Symington.

Fool contributor Steve Symington owns shares of Apple and NVIDIA. The Motley Fool recommends Apple, Intel, and NVIDIA. The Motley Fool owns shares of Apple, Intel, and Microsoft.

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