You could be forgiven if you thought that Nvidia (NVDA 5.27%) was a young company. It’s rare for the stock of a mature business to suddenly take off after it’s been on the market for a few years. But Nvidia actually went public in 1999. It had been a solid gainer for many years before generative artificial intelligence (AI) set it off higher, but it was hardly a household name.
Over the past two years, though, it’s gained 374% as generative AI becomes part of regular parlance. Armchair analysts have been dissecting Nvidia’s continued potential. Is the ride over? Is it still worth buying today? No, and yes, in that order. Here’s why.
Inestimable potential
There are varied estimates for how big the AI opportunity is going to be, but they have one thing in common: It’s going to be BIG. McKinsey estimates the long-term opportunity at $4.4 trillion. According to a Harvard Business Review study in collaboration with Amazon Web Services (AWS), 81% of respondents say Generative AI is going to transform their industry, and 83% feel that if they don’t use it, they’re going to fall behind.
Nvidia makes the hardware that powers generative AI. There are competitors, but Nvidia is the clear leader, and partners like Amazon and Alphabet rely on it for their competitive AI programs.
The market was in suspense about Nvidia’s latest earnings report, concerned that with new competition and already high sales, growth might decelerate. The company put any idea of a slowdown to rest with a blowout earnings report demonstrating a 78% year-over-year increase in revenue and an 8% increase in earnings per share (EPS).
When the DeepSeek news sent Nvidia stock tumbling a few months ago, Nvidia CEO Jensen Huang smartly observed that progress in the space was a win for all of the players. As generative AI takes a foothold in almost every industry, Nvidia’s products become even more important, and its market becomes that much larger.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
