Nvidia (NASDAQ: NVDA) has been one of the hottest stocks in recent years (up 582% since June 2021), but there are reasons to believe there is still plenty of upside potential.
Let’s take a look at six reasons why now could be a good time to buy Nvidia stock like there’s no tomorrow.
1. Nvidia is struggling to meet product demand
Demand for Nvidia’s graphics processing units (GPUs) is skyrocketing as companies clamor to supply their model training and inference chips for artificial intelligence (AI) used in data centers. This has led to incredible growth in the data center segment, with revenue increasing 427% year over year to $22.6 billion in the first quarter of fiscal 2025.
The company credits its growth to its Hopper GPU computing platform, which includes the H100 and H200 chips. According to Nvidia, demand for the H200 chip along with the just-introduced Blackwell architecture is far exceeding demand, and this could remain the case well into 2025.
At this point, the only thing stopping Nvidia from selling more GPUs appears to be supply constraints as its semiconductor manufacturing partners look to increase production capacity to meet demand.
2. CUDA widened Nvidia’s technological moat
Nvidia isn’t the only GPU maker, but its chips have become the industry standard thanks to the CUDA software platform. The company created the free software platform in 2006 that allowed programmers to program the chips directly. As a result, programmers learned to program GPUs using the CUDA platform.
This has created a huge challenge for Nvidia as most GPU programmers have knowledge of the CUDA platform and how to use it. Retraining programmers on other software platforms would be time-consuming and therefore expensive. Programmers having to know different software platforms would also likely make them less efficient.
By connecting its GPUs to CUDA, Nvidia has been able to control the entire tech stack, from the GPUs to the software and firmware updates. Meanwhile, as it advances its technology, it makes it backwards compatible so that the newer technology can work with its older technology.
All told, this moat has helped the company capture around 80% share of the GPU market.
3. Nvidia continues to innovate
Another important part of the Nvidia story is its continued innovation in the GPU space. The company accelerated its development cycle from two years to one year, making progress. This should not only keep demand strong, but also keep prices high as it continues to drive innovation.
The company’s Hopper architecture is driving huge demand, but it has already introduced its new Blackwell architecture to generate additional sales in the second half of this year and into 2025. Meanwhile, the company’s new Rubin architecture is already scheduled for 2026.
Nvidia’s architecture will be backwards compatible with its older technology, but this accelerated innovation schedule should be a huge driver as customers try not to fall behind.
4. The AI boom is just beginning
While it seems like everyone has always been talking about AI, it only really became mainstream after OpenAI launched ChatGP in November 2022. Shortly afterwards it really became mainstream. Microsoft has meaningfully increased its investment in the startup and has begun integrating AI into its products. The AI race has been on ever since, with numerous major tech companies looking to get in on this next big technological advancement.
That said, we are still in the early stages of generative AI. The technology is still relatively new and many companies across industries are still creating their own AI roadmaps and how to improve their operations.
This is good news for a company like Nvidia. AI could be much bigger in a few years and many more GPUs will be needed to power the AI revolution.
5. Automotive: the next AI opportunity
One area of AI that could be the next big opportunity for Nvidia is automotive. Vehicles today are essentially computers on wheels, and AI will play a big role when it comes to self-driving vehicles.
Tesla uses Nvidia chips to train its neural networks for its self-driving and autopilot functions. The company is currently using a unit consisting of 10,000 H100 GPUs from Nvidia, worth approximately $300 million, to support the training of its self-driving technology.
Nvidia has also developed other technology, especially for the automotive sector, such as Nvidia Drive Thor, a centralized car computer for “generative AI applications and immersive experiences in vehicles.” Although the data center is the company’s largest market, the automotive market is also promising.
6. Nvidia’s valuation is relatively cheap
Despite Nvidia’s huge price gains in recent years, the stock is relatively cheap, trading at around 45 times its price-to-earnings (P/E) ratio. That’s well below the valuation the stock traded at a few years ago, and cheap given its proven growth. While the company still has all its chances, its valuation is another reason why investors should consider buying the stock like there’s no tomorrow.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
6 Reasons to Buy Nvidia Stock Like There’s No Tomorrow was originally published by The Motley Fool
