• Shares in Nvidia are up over 200% in the last 12 months.
• The company snapped up an estimated 90% market share in AI chips.
• Meanwhile, its stock is at one of its best-valued positions in the last 12 months.

The company is crushing it in AI and is profiting from a recovering PC market. Nvidia (NVDA 3.58%) became a Wall Street darling last year when a boom in artificial intelligence (AI) highlighted the massive potential of its business. Its stock climbed 214% since last February and has shown no signs of slowing, rising 40% since the start of 2024.

The launch of OpenAI’s ChatGPT reinvigorated interest in AI and caused countless tech firms to restructure their businesses to prioritize the developing market. Increased demand for AI services boosted graphics processing unit (GPU) sales accordingly, as the chips are crucial for training AI models.

As a leader in GPUs, Nvidia’s business exploded over the last year. Meanwhile, the AI market’s compound annual growth rate of 37% until at least 2030 suggests GPU demand is unlikely to slow. Consequently, Nvidia remains one of the best ways to invest in the high-growth sector and tech in general.

So, here are four reasons to buy Nvidia stock like there’s no tomorrow.

1. Nvidia’s meteoric rise over the last year

Nvidia dominated the GPU market for years, significantly ahead of rivals Advanced Micro Devices and Intel. The company’s supremacy in the industry positioned it to immediately begin supplying its hardware to countless AI-minded firms right at the start of the AI boom last year.

In its most recent quarter (the third quarter of fiscal 2024 ended Oct. 29), Nvidia’s revenue increased by 206% year over year to $18 billion. Meanwhile, operating income jumped 1,600% to more than $10 billion. The monster growth was primarily thanks to a 279% increase in data center revenue, reflecting a spike in AI GPU sales.

In addition to soaring earnings, Nvidia’s free cash flow is up 243% in the last year to more than $17 billion, significantly higher than AMD’s $1 billion and Intel’s negative $14 billion.

So, despite new GPU releases from both chipmakers, Nvidia’s head start in AI potentially pushed it further ahead with greater cash reserves to continue investing in its technology and retain its market supremacy.

2. A majority market share will be challenging for rivals

Nvidia achieved an estimated 80% to 95% market share in AI GPUs last year. The company’s massive success in the industry motivated several tech firms to venture in as well. In 2024, AMD and Intel will begin shipping new AI GPUs specially designed to challenge Nvidia’s offerings. However, chip-market trends indicate Nvidia’s supremacy will be challenging for competitors to overcome.

Despite AMD’s and Intel’s presence in the sector, Nvidia held an over 80% market share in desktop GPUs for years. Intel only entered the industry last year, while AMD’s history in desktop GPUs spans decades. Still, AMD’s GPUs only account for about 10% of the market.

A similar situation occurred in the central processing unit (CPU) industry. Intel was king of CPUs for years, with an 82% market share at the start of 2017 when AMD landed on the scene with its Ryzen line of CPUs.

AMD managed to steal a significant share from Intel. However, Intel is still responsible for most of the CPU market, with its share above 60% and AMD’s at 36%.

Using the CPU market as a base of comparison, Nvidia could lose some AI GPU share to its competitors over the next year. However, it is unlikely to lose its leading position, which will allow it to see major gains from AI for years.

3. Nvidia benefits from a PC market recovery

While a spike in AI GPU sales is mainly responsible for Nvidia’s stellar financial growth, the chipmaker is also profiting from an improving PC market. Spikes in inflation prompted steep declines in PC sales, with shipments dipping 16% in 2022 and continuing to fall for most of 2023. However, recent reports indicate the market is finally showing signs of recovery.

Data from Gartner shows PC shipments popped 0.3% in Q4 2023, marking the first increase over a year. Market improvements have reflected in Nvidia’s sales, with its PC-centered gaming segment reporting an 81% rise in revenue in Q3 2024.

4. At its best value in 12 months

NVDA PE Ratio Chart

• DATA BY YCHARTS. PE RATIO = PRICE-TO-EARNINGS RATIO.

Nvidia’s price-to-free cash flow and price-to-earnings (P/E) ratios plunged in the last year (as seen in the chart above), indicating its stock is at one of its best-valued positions in 12 months.

P/E is calculated by dividing a company’s stock price by its earnings per share. Meanwhile, the price-to-free-cash-flow ratio divides its market cap by free cash flow. These are helpful valuation metrics as they take into account a company’s financial health. For both, the lower the figure, the better the value. Nvidia’s declining figures could make now the best time to consider adding its stock to your portfolio.

Along with a powerful position in AI and an improving PC market, now is an excellent time to make a long-term investment in Nvidia and buy its stock like there’s no tomorrow.

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FAQ

Q1: What has been the recent performance of Nvidia’s stock?

• Nvidia’s stock has surged over 200% in the last 12 months, making it a notable performer in the market.

Q2: What contributed to Nvidia’s significant growth?

• Nvidia secured an estimated 90% market share in AI chips, particularly benefiting from the increased demand for AI services.

Q3: How does Nvidia’s financial performance look?

• In the third quarter of fiscal 2024, Nvidia’s revenue increased by 206% year over year to $18 billion, with operating income jumping 1,600% to over $10 billion.

Q4: What factors indicate Nvidia’s sustained dominance in the GPU market?

• Nvidia achieved a substantial market share of 80-95% in AI GPUs. Trends in chip markets suggest that competitors, such as AMD and Intel, may find it challenging to overcome Nvidia’s supremacy.

Q5: What role did the recovery of the PC market play in Nvidia’s success?

• Nvidia profited from an improving PC market, with its PC-centered gaming segment reporting an 81% rise in revenue in Q3 2024, correlating with the recovery in PC shipments.

Q6: Why is the current period considered an opportune time to invest in Nvidia?

• Nvidia’s price-to-free cash flow and price-to-earnings (P/E) ratios indicate that the stock is at one of its best-valued positions in the last 12 months, making it a potentially attractive investment opportunity.

Q7: What makes Nvidia a key player in the high-growth sector and tech industry?

• Nvidia’s leadership in GPUs, especially in the context of the booming AI market with a compound annual growth rate of 37%, positions it as one of the best ways to invest in high-growth sectors and the broader tech industry.

Note: All data and figures mentioned in the FAQ are based on the information provided in the article and are for illustrative purposes only. – includes tables and data