Is NVIDIA Stock Halal to invest in? Facts you should know :: 18th December 2023

Business Sector Screening:

NVIDIA is a pioneering technology company that originally focused on PC graphics and has since expanded into various computationally intensive fields. Founded in 1993, the company is known for its Graphics Processing Unit (GPU) architecture, which was initially designed for simulating human imagination in video games and films. The company’s GPUs, with parallel processing capabilities and thousands of computing cores, play a key role in running deep learning algorithms for AI applications. NVIDIA has a platform strategy, offering a unified architecture that spans hardware, systems, software, algorithms, libraries, and services. Their innovation includes the invention of the GPU in 1999 and the introduction of the CUDA programming model in 2006, opening up GPU parallel processing for general-purpose computing.

NVIDIA’s impact extends across diverse markets, including gaming (with GPUs preferred by gamers and eSports enthusiasts), research and development (accelerating applications in areas like climate forecasting and genomics), cloud services (utilized by leading providers for various online services), enterprise automation (applied in autonomous driving, healthcare, and finance), and professional design (for visual effects and product design).           

Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:

Segment Breakup: (In millions of USD) for year ended 29^th January 2023

Tricky Areas from a Shariah perspective:

Looking into the nature of the business, the tricky area that can be observed from a Shariah perspective is their involvement in the gaming industry.

While the Company does produce GPUs which are commonly used by consumers for gaming, this does NOT Indicate that the nature of the business itself is Shariah Not Compliant, mainly due to two reasons:

1. The Company does not produce GPUs with the specific aim of it being used in games that are violent, having sexual content  – which are considered non- Shariah. It is a generic product which is also widely used for various other purposes such as machine learning, Video editing, designing, rendering 3D structures, crypto mining, and so on.
2. Even if the assumption is made that the GPUs are produced for gaming, the Company has NO control over the games that the end users use it for, and not all games can be considered as Shariah Not Compliant.

Based on the above information, it is safe to assume that the business operations of Nvidia Corp., would be Shariah Compliant.

Let’s have a look at the non-operating income of the company.

Non-operating Revenue: (In millions of USD) for year ended 29^th January 2023

It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.

Sector Compliance Calculation:

Dividend Purification Calculation:

Financial Ratio Screen:

(All figures in millions of USD for the Quarter ended 29^th October 2023)

Source: All the above information is based on the website of the company and the latest Quarterly Report for the period ended 29^th October 2023.

Conclusion:

Given the above information, we at Islamicly believe that Nvidia Corp. is a Shariah-compliant company as per the Shariah screening criteria.