After a dip in July, shares are up Nvidia (NASDAQ: NVDA) have recovered and are up almost 200% at the time of writing. Wall Street remains very bullish on the company’s prospects as 2024 draws to a close.
Nvidia has launched new products to meet the demand for artificial intelligence (AI) workloads in data centers, which should fuel another year of strong growth in 2025. But beyond the short term, There’s one big reason why the stock remains a solid buy-and-hold investment.
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Zooming out, Nvidia estimates that $1 trillion in data center infrastructure will transition from traditional computing to hardware optimized for AI, or what the company calls accelerated computing. This transition formed the basis for Nvidia’s accelerating growth in recent years.
When OpenAI launched ChatGPT in 2022, leading cloud service providers and researchers realized they needed to capitalize on the opportunity, and that created a huge demand for graphics processing units (GPUs), which are needed to train AI models. Nvidia is on track to grow revenue 106% to $126 billion in fiscal 2025, while Wall Street analysts predict 42% revenue and profit growth next year.
This growth will likely push the stock to new highs. The stock trades at a price-to-earnings ratio of 52, but that multiple drops to 37 when taking into account the consensus earnings estimate for the 2026 fiscal year. As Nvidia captures more of those $1 trillion data center opportunities, the stock may as of now still deliver good returns.
But there are a few risks to consider. The semiconductor industry is sensitive to fluctuations in demand depending on several factors, such as the health of the economy and the capital expenditure trends of cloud leaders. In the long run, however, Nvidia’s innovation will keep the company in the driver’s seat of the GPU market, where it has been in business for nearly two decades. The stock still looks like a solid long-term buy.
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