Nvidia (NASDAQ: NVDA) was the best-performing stock in the S&P 500 (SNPINDEX: ^GSPC) over the last five years, with shares soaring 2,890%. The company completed two stock splits during that period. The first was the 4-for-1 stock split in July 2021, and the second was the 10-for-1 stock split in June 2024.
Monster gains notwithstanding, Wall Street is still bullish on the semiconductor company. Of the 65 analysts who follow Nvidia, 92% give the stock a buy rating and the remaining 8% give the stock a hold rating. Moreover, Nvidia’s median price target of $150 per share implies 14% upside from its current share price of $132.
Here’s what investors should know about this artificial intelligence stock.
Nvidia is the foundation of the artificial intelligence movement
Nvidia designs the most coveted graphics processing units (GPUs) in the computing industry. GPUs perform technical calculations faster and more efficiently than central processing units (CPUs), which lets them speed up complex workloads like artificial intelligence (AI). Nvidia has more than 80% market share in data center AI processors, and its leadership is rooted in CUDA.
Nvidia introduced its CUDA programming model in 2006. It turned GPUs (originally designed for computer graphics) into general-purpose chips capable of accelerating all sorts of applications. The CUDA ecosystem now includes hundreds of software libraries that streamline development workflows across a range of disciplines, from data analytics and machine learning to scientific simulation and computational chemistry.
No other chipmaker offers comparable developer tools, so Nvidia GPUs have become the gold standard. “Year after year, Nvidia responded to the needs of software developers by pumping out specialized libraries of code, allowing a huge array of tasks to be performed on its GPUs at speeds that were impossible with conventional, general-purpose processors like those made by Intel and AMD,” according to The Wall Street Journal.
More recently, Nvidia has pushed further into software and services with AI Foundry and AI Enterprise. The former lets businesses customize pre-trained large language models on Nvidia supercomputing infrastructure, and the latter simplifies AI application development across use cases like content generation, robotics, and predictive analytics. “Nvidia software will exit the year at a $2 billion run rate,” CEO Jensen Huang recently told analysts.
Finally, Nvidia has further reinforced its leadership and augmented its ability to monetize AI by expanding into new data center hardware verticals. “We literally build the entire data center, and we can monitor everything, measure everything, and optimize across everything,” explained Huang. Importantly, Nvidia has secured a leadership position in generative AI networking gear, and demand for its first data center server CPU (Grace) is very strong among supercomputing clients.
Here’s the bottom line: Nvidia is more than a chipmaker. It’s a full-stack accelerated computing company with products that span hardware, software, and services. The breadth of its portfolio, coupled with the best-in-class performance of its GPUs, affords Nvidia a competitive moat that rival chipmakers will find it difficult to overcome.
Nvidia’s stock trades at a reasonable valuation compared to Wall Street’s forecast
Nvidia reported second-quarter financial results that beat expectations. Revenue soared 122% to $30 billion driven by particularly strong growth in the data center segment, and non-GAAP earnings increased 152% to $0.68 per diluted share.
“Nvidia achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI,” said Huang. The chart below shows Nvidia’s revenue growth across its four primary business segments.
|
Segment |
Q2 2024 |
Q2 2025 |
Change |
|---|---|---|---|
|
Data Center |
$10.3 billion |
$26.3 billion |
154% |
|
Gaming and AI PC |
$2.5 billion |
$2.9 billion |
16% |
|
Professional Visualization |
$379 million |
$454 million |
20% |
|
Automotive and Robotics |
$253 million |
$346 million |
37% |
|
Total |
$13.5 billion |
$30 billion |
122% |
Data source: Nvidia. Note: Q2 2025 ended July 2024.
In the near term, Nvidia has a major catalyst in the upcoming launch of its Blackwell GPU. The next-generation chip can handle AI training and inference tasks four times faster and 30 times faster, respectively, compared to the previous Hopper architecture. The Blackwell production ramp will begin in the fourth quarter of fiscal 2025 (ending January 2025). CEO Jensen Huang says it will likely be the most successful product in the history of the computing industry.
Looking further ahead, Grand View Research says AI accelerator sales will increase at 29% annually through 2030, while spending across AI hardware, software, and services increases at 36% annually during the same period. Nvidia is one of the companies best positioned to benefit. Indeed, Angelo Zino at CFRA says Nvidia “will be the most important company to our civilization over the next decade as the world becomes more AI-driven.”
Wall Street estimates Nvidia’s earnings will grow at 37% annually over the next three years. That consensus makes the current valuation of 62 times earnings look reasonable. Those figures give Nvidia a PEG ratio of 1.7, a discount to the three-year average of 3.1. Patient investors can confidently buy a small position in Nvidia today, and they should plan to add a few more shares if the stock suffers a pullback of 10% or more.
Should you invest $1,000 in Nvidia right now?
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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
1 Stock-Split Artificial Intelligence (AI) Stock Up 2,890% in 5 Years to Buy Now, According to Wall Street was originally published by The Motley Fool
