May 9, 2008 12:21PM

Bought NVDA? What to Do Now that Nvidia Rallies After Decent Report

By Cody Willard

Okay, so we got lucky again and Nvidia’s up pretty nicely after its report last night. The company did indeed deliver an update that said business is fine. And that’s pretty much all Wall Street needed to see and hear.

The company talked a lot about how we’re becoming an ever-more graphics central computing world — something I mentioned here and especially on Happy Hour when I was previewing this stock as a trade into earnings this week.

I also like how the company’s got such a huge critical mass of an established base to build off of out there. Graphics chips have a whole lot more proprietary technology than say, oil or DRAM or Flash, and developers have to choose a platform to build their graphics on. AMD’s floundering with ATI’s graphics technologies has really given Nvidia a huge lead and established base now, and that’s really important for future growth. Not to mention it’s important simply for future recurring revenue.

And here’s how I’d play this Nvidia trade now - I’d sell half my calls right now for a pretty decent gain off today’s pop. I’d keep the other half for the foreseeable future and look to sell them if the stock runs past, say, about $25 a share of so. And the little bit of common I’d hold here for an investment for the next couple years (which means you have to stay ON TOP OF THIS STOCK until you sell the common too, btw).