10 Reasons to Buy Nvidia Stock Like There’s No Tomorrow

One of the biggest investment stories of the last few years has been the opportunity presented by artificial intelligence (AI), and arguably no company is better positioned to benefit from this long-term tailwind than Nvidia (NVDA -3.70%)The chipmaker has become a symbol of the AI ​​revolution, giving it a leadership position in a large and growing opportunity.

According to McKinsey & Company, generative AI is expected to add $2.6 trillion to $4.4 trillion to the global economy over the next decade, and Nvidia is leading the way. This massive opportunity is one of many reasons investors should buy Nvidia stock like there’s no tomorrow. Let’s look at a few others.

1. Nvidia dominates the data center market

It’s hard to deny that Nvidia has an advantage when it comes to graphics processing units (GPUs) in data centers, but some investors may not realize just how dominant the company is.

According to IoT Analytics, Nvidia controls about 92% of the data center GPU market, although that estimate may be conservative. TechInsights goes further, claiming that Nvidia will control 98% of the data center GPU market in 2023. While estimates vary, the indication is clear.

The competition is set to gradually erode its dominance. However, given Nvidia’s early lead and continued momentum, it should remain the clear leader for years to come.

2. It is the undisputed leader driving earlier versions of artificial intelligence

While generative AI made a splash early last year, AI has been around for decades, and Nvidia helps power these advanced algorithms. For example, Nvidia controls 95% of the market for graphics processing units used in machine learning—the earlier version of AI—according to New Street Research estimates. That experience will soon come in handy.

3. The Inner Path for Generative AI

Nvidia’s wealth of experience in this space and dominance in previous versions of AI made it an obvious choice for developers when generative AI entered the scene. As developments in this space continue at lightning speed, it’s even harder to pin down Nvidia’s market share. Analysts at Mizuho suggest it’s somewhere between 70% and 95% for AI models. That’s in line with the estimate Fortunegiving Nvidia an 80% market share.

4. Platform Factor

Nvidia’s dominance in the AI ​​and data center markets has lasted for years, but it’s not just a result of its chipmaking process. In 2007, Nvidia introduced Compute Unified Device Architecture (CUDA), a parallel computing architecture and platform that helps developers by dramatically accelerating compute applications built on its GPUs.

According to Nvidia, CUDA provides developers with over 300 libraries and 600 AI models and supports over 3,700 GPU-accelerated applications. This ecosystem includes over 5 million developers across 40,000 companies, which helps explain why it will be so hard to “chip away” at Nvidia’s dominance, considering it’s the preferred development platform for developers.

5. It’s not just about chips anymore

While its processors are the backbone of Nvidia’s empire, it’s no longer just about chips. The company is gradually expanding into adjacent markets and also providing support products that help its GPUs perform even better. These other capabilities could help fuel the next stage of Nvidia’s growth.

For example, Nvidia provides InfiniBand networking solutions, including switches and adapters that reduce latency and speed up network connections. Then there’s NVLink and the NVLink switch, used to connect multiple GPUs in a chain, accelerating the resulting connections to unleash their full power. The company also offers its own line of ready-made AI servers and supercomputers.

6. Solid spending on research and development (R&D)

It’s no coincidence that Nvidia has maintained its position at the top of the AI ​​chip stack. The company has a long history of spending heavily on research and development (R&D) to maintain a technological edge. In fiscal 2024 (ended January 28), Nvidia spent nearly $8.7 billion on R&D, up 18% and 14% of the company’s total revenue.

In addition to maintaining its technological edge, the increased spending has also helped the company innovate faster. Earlier this year, Nvidia announced that it would no longer stick to its historic two-year cadence for releasing new processors, but would release new chips every year instead.

It was already hard for rivals to keep up with Nvidia’s insane pace of growth, but it will be even harder now.

7. Let’s not forget about games

At this point, it seems almost like a footnote, but Nvidia began its journey as a video game pioneer. This parallel computing, or the ability to perform multiple, complex calculations simultaneously, revolutionized the gaming industry, turning boxy figures into lifelike images.

Nvidia is still the undisputed leader, with an 88% share of the desktop discrete GPU market, according to industry analyst Jon Peddie Research. That leaves a lot of room for competition. Don’t expect that to change anytime soon.

8. Explosion of profitability

The emergence of generative AI early last year and the resulting rapid adoption were a boon for Nvidia, with revenue of $60 billion in fiscal 2024 growing 126% year over year. That brought with it a flood of rising profitability, as diluted earnings per share (EPS) of $11.93 jumped 586%.

That trend continued this year. In the first quarter of fiscal 2025 (ended April 28), revenue of $26 billion increased 262% year over year, while EPS of $5.98 increased 629%.

Management is forecasting that the growth streak will continue. The company is forecasting second-quarter revenue of $28 billion when Nvidia reports on Aug. 28. Analyst consensus estimates are even higher, calling for revenue of $28.6 billion. In either case, that’s a phenomenal sales increase, and profits are likely to follow suit.

9. Shareholder profits are growing

Nvidia’s recent run has been a windfall for shareholders, with the stock up more than 500% over the past three years at the time of writing. But investors have also benefited in other ways.

In conjunction with the company’s quarterly report and the disclosure of a 10-for-1 stock split in May, Nvidia announced that it was increasing its dividend by 150% from $0.04 to $0.10. The dividend hasn’t been a priority for the company up until now, as growth has taken center stage. However, given its newfound wealth, I wouldn’t be surprised if more hikes are on the horizon.

10. It’s not as expensive as you might think

Nvidia’s rapidly rising stock price has brought with it a commensurate increase in its valuation, which has caused some investors to stay away. That’s understandable, considering the stock currently trades for 74 times earnings and 39 times sales, but that’s only part of the story. While the price-to-earnings (P/E) and price-to-sales (P/S) ratios are among the most commonly used valuation metrics, they also have their limitations. They tend to label most high-growth stocks as expensive or overvalued by default.

However, Nvidia’s price-to-earnings-to-growth (PEG) ratio, which takes into account its impressive growth trajectory, is 0.7, while any number below 1 indicates an undervalued stock. So the stock isn’t as expensive as it seems at first glance.