Nvidia (NASDAQ: NVDA) General Electric stock has been among the best performing stocks over the past five years, rising a staggering 2,430%. Given these gains, the question many investors are now asking is whether it’s too late for new investors to buy in and see above-average returns.
Let’s take a look at four reasons why Nvidia stock is still worth buying like there’s no tomorrow.
1. It is still early days when it comes to building the infrastructure for AI.
Nvidia has benefited greatly from the growing interest in artificial intelligenceas its graphics processing units (GPUs) are the backbone of the computer server infrastructure used to train Large language models So far, demand for GPUs and other chips has been insatiable, as cloud computing companies and other tech giants ramp up their AI-related spending in an effort to stay ahead of the demand curve.
Concerns are growing that companies are building up too much capacity, but most are showing no signs of slowing their spending. In fact, management in both Meta platforms and alphabet She says the biggest risk associated with corporate spending on AI is underinvestment and missing out on a huge potential opportunity.
For its part, Meta said that training its new Llama 4 LLM will likely require nearly 10 times the computing power of Llama 3. To handle that load, it will need 160,000 GPUs compared to 16,000 for Llama 3. xAI’s latest Grok 3 LLM is expected to require 100,000 GPUs, compared to the 20,000 used by Grok 2.
The growing need for more computing power and GPUs as machine learning management (LLM) software advances shows a potentially long path to growth for Nvidia.
2. Nvidia’s software unit gives it a wide competitive moat
Nvidia isn’t the only company that produces GPUs. Advanced Micro Devices (NASDAQ: AMD) Nvidia is working in this field and other companies are trying to penetrate it, hoping to benefit from the huge market that Nvidia currently controls.
The company gained this dominance because its chips have long been the industry standard thanks to its CUDA software platform. Nvidia created the software platform in 2006 as a way for developers to program Nvidia’s GPUs directly. The company gave the software away for free to sell more chips. As a result, CUDA became the primary software that developers learned how to program GPUs on.
This reliance on CUDA has helped create a wide moat for the company’s GPUs. While AMD has since developed its own software platform, ROCm, it’s not as good as CUDA. And the time and cost of retraining people on ROCm or other software platforms is high.
CUDA technology helps Nvidia control the entire GPU family from hardware to software and any firmware updates required. At the same time, all of its technology is backward compatible, creating a seamless transition for customers to build AI infrastructure and not have to worry about expensive hardware purchases from a few years ago becoming obsolete.
Nvidia’s moat has helped it capture more than 80% market share in the GPU market. In the second quarter, its data center GPU business saw revenue rise 154% year over year to $26.2 billion. By comparison, AMD’s data center revenue grew 115% to $2.8 billion.
3. Nvidia has accelerated its innovation cycle.
In addition to the widening moat Nvidia has built with its CUDA software platform, the company has also accelerated its innovation cycle. It now plans to introduce updated GPU architectures roughly every year, compared to two years previously. The company is currently seeing strong demand for its Hopper GPU architecture, which was introduced in 2022. It plans to start shipping chips built on the new Blackwell GPU architecture in Q3 of this year (a short delay prevented them from being introduced in Q2).
Meanwhile, Nvidia has already announced plans to introduce its next-generation Rubin architecture in early 2026. Its release schedule also shows its Ultra platform coming in 2027. As mentioned earlier, all of its platforms are CUDA-compatible, so customers don’t have to worry about their chips becoming obsolete.
This accelerated innovation cycle will allow the company to do two main things. First, it should help it maintain its technological leadership in the hardware space as more competitors enter the market. Second, continued innovation should help the company maintain its pricing power. Nvidia’s chips are expensive and come with high margins, so it needs to stay on the cutting edge, which is clearly what it aims to do.
4. Nvidia stock is still relatively inexpensive based on some valuation metrics.
Nvidia stock, trading at a forward price-to-earnings ratio of about 27 and a forward price-to-earnings-to-growth ratio of about 0.7, is still inexpensive for a company that has seen triple-digit revenue growth. That kind of growth can’t last forever, but given the massive computing power needed to develop AI and its wide moat, Nvidia still has a very large runway to grow.
With the stock price recently pulling back from its highs, now seems like a great time to buy Nvidia stock like there’s no tomorrow.
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Randi Zuckerberg, former chief market development officer and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeffrey Seller The Motley Fool has positions in Alphabet, and recommends Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. The Motley Fool has positions in Alphabet, and recommends Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. Disclosure Policy.
4 Reasons Why You Should Buy Nvidia Stock Like There’s No Tomorrow Originally posted by The Motley Fool
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