With so many investment opportunities available, investing in category leaders is a good place to start. These businesses are typically lauded by customers and have better pricing power than smaller, less established players.
Three leading tech stocks are Nvidia (NASDAQ:NVDA), Ansys (NASDAQ:ANSS), and Match Group (NASDAQ:MTCH). Each has competitors in their respective fields, but none do it better than these companies.
Nvidia: The leader in graphics
Nvidia makes graphics processing units (GPUs) that have historically been used for generating 3D graphics in computers and gaming systems. Now, this powerful hardware is seeing its usage expand into other solutions like artificial intelligence (AI) and cloud computing, creating a larger market for Nvidia to capture. As much as 70% of the world’s 500 current most powerful computers and 90% of new systems utilize Nvidia’s GPUs.
This leader has seen tremendous business success over the last few quarters. During its third quarter ending Oct. 31, it grew revenue 65.2% to $7.1 billion. Even more impressive is its accelerating gross margin.
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Accelerating gross margin demonstrates a business’s ability to flex its pricing power. Whether it means raising consumer prices to generate more revenue, creating products more efficiently and lowering the cost of goods, or pressuring suppliers into cutting their prices, pricing power is Warren Buffett’s “single most important factor when evaluating a business.”
As more powerful computers are needed to support cloud infrastructure, Nvidia’s market opportunity will increase in lockstep. Nvidia also has technology in the autonomous vehicle sector and the metaverse. With a best-in-class product line and involvement with some of the most exciting future developments, Nvidia is poised as a great investment.
Ansys: The leader in engineering simulations
In the past, trial and error was an expensive way to determine whether a part would work. However, there was no other way to test if an idea was valid. Now, engineers can run their design through simulation software to gain valuable insights and optimize the design, all while reducing development costs. Ansys is the leader in engineering simulation software and is double the size of its nearest competitor.
While other competitors have multiple segments, Ansys is focused on simulation software. By keying in on this area, Ansys offers solutions in many fields like optical, semiconductors, and fluids where competitors offer a couple. This allows Ansys software programs to integrate with each other and create layered solutions like structural and thermal analysis on a circuit board. Tying in with Nvidia, computers utilize GPUs when running simulations, demonstrating another use case for Nvidia’s products.
Ansys’ third-quarter revenue increased 20% and turned 86% of it …….