Artificial intelligence (AI) stocks have been driving market gains in recent times thanks to the technology’s future potential. By using AI, companies can become more efficient, develop better products faster and more – and this could lead to increasing profits over time.
That’s why companies are now investing in AI platforms, and this trend has helped boost profits Today for makers of the tools needed to make AI function. These particular players don’t have to wait for AI to increase sales and profits, and one in particular stands out right now.
I’m talking about chip designer Nvidia (NASDAQ: NVDA). The company’s graphics processing units (GPUs) perform some of the most crucial AI tasks, such as training and inferring large language models so that these models can then do their job solving complex problems.
If you want to prepare for an AI win, you should invest in a variety of stocks, from stocks that use AI to improve their businesses to stocks that sell AI tools. And to maximize your returns in this AI boom, you’ll want to include Nvidia in the mix. Here’s why this top stock is a must-have in your technology portfolio.
Nvidia’s extensive revenue capabilities
First, a quick recap of Nvidia’s path so far. A few years ago, Nvidia’s GPUs mainly served the video games industry. However, as it became clear that the GPU’s speed could serve many other industries, Nvidia’s revenue opportunities expanded. Fast forward to a few years ago, when AI was emerging as the next fast-growing technology area. Here it was clear that the GPU’s ability to perform many tasks simultaneously made it perfect for those developing AI platforms.
Nvidia focused its attention there not only on selling GPUs, but also on offering related products and services, such as business software. Nvidia is now an AI powerhouse, generating more than $47 billion from the business last year – compared to about $10 billion from the video games industry.
In recent quarters, the company has achieved record sales, triple-digit revenue and net profit growth and expanded margins. Nvidia also controls 80% of the AI chip market and is known as the go-to source for premium AI chips.
Even Tesla CEO Elon Musk recently said, “There’s nothing better than Nvidia hardware for AI right now.”
A fantastic track record
This fantastic track record is part of the reason why Nvidia should be in your AI portfolio, but the rest of the reason could be even more important. That’s because Nvidia is set to stay in its dominant position despite increasing competition from other chip makers, even as those rivals gain greater market share.
Nvidia must continue its leadership due to the high demand for AI chips and related products and thanks to its innovation. The level of demand is exceeding supply, and we are only in the early days of AI development. That suggests demand could increase, and Nvidia and other companies, such as Intel And Advanced micro devicescan each achieve an AI victory.
When it comes to innovation, Nvidia is making this its priority and promises to update its GPUs annually, which should keep the company ahead of the crowd. Even if a rival releases a better chip today, a few months from now, Nvidia will surpass that with its next GPU. Next up is the Blackwell architecture and the company’s most powerful chip yet, which will arrive later this year, and Nvidia says it will eventually launch “other Blackwells.”
Nvidia stock has risen in recent weeks, pushing its valuation to 46 times forward earnings estimates, up from less than 30 times earlier this year. But even at this price, Nvidia represents a solid buy for the long-term investor because of the company’s established dominance – and its strategy to stay ahead.
And that’s why, if you want to maximize your returns in this AI boom, you should add Nvidia to your portfolio and hold it for the long term as the AI growth story continues to accelerate.
Should You Invest $1,000 in Nvidia Now?
Consider the following before buying shares in Nvidia:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $775,568!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Adria Cimino has positions in Tesla. The Motley Fool holds positions in and recommends Advanced Micro Devices, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls to Intel and short August 2024 $35 calls to Intel. The Motley Fool has a disclosure policy.
Maximizing Returns in the AI Boom: Why Nvidia is a Must-Have in Your Technology Portfolio was originally published by The Motley Fool
