Nvidia makes the best picks and shovels for the AI gold rush.
Its stock still looks reasonably valued relative to its growth potential.
Nvidia‘s (NASDAQ: NVDA) stock has rallied more than 23,000% over the past ten years. A large portion of that rally was driven by its skyrocketing sales of data center GPUs for AI applications, which replaced PC GPUs as its core business. Investors might be wary of buying Nvidia after those massive gains, since it’s already the world’s most valuable company with a market cap of $4.5 trillion. But could it be a good place to park a modest $500 investment?
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Nvidia’s GPUs process parallel tasks, while traditional x86 CPUs are optimized for sequential tasks. That key difference makes them better suited for handling complex AI tasks. Nvidia now controls over 90% of the discrete GPU market, and most of the world’s top AI companies use its GPUs to train their latest AI applications. It also locks in those clients with CUDA (Compute Unified Device Architecture), its proprietary programming platform optimized for its own chips.
From fiscal 2025 (which ended last January) to fiscal 2028, analysts expect Nvidia’s revenue and EPS to grow at CAGRs of 47% and 46%, respectively, as the AI boom continues. Those are incredible growth rates for a stock that trades at 26 times next year’s earnings — so it could easily turn a $500 investment into a lot more money over the long term.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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