Should You Buy Nvidia's Stock Right Now?
Key Points
This AI stock trades at a compelling valuation, even after its meteoric 1,300% trailing-five-year rise.
The AI boom is in full force, and investors are smart to consider a pick-and-shovel investment like Nvidia.
- 10 stocks we like better than Nvidia ›
When it comes to stocks benefiting from the artificial intelligence (AI) revolution going on in the global economy, Nvidia (NASDAQ: NVDA) has been the biggest winner thus far. The business sells powerful graphics processing units (GPUs) that have been incredibly popular among customers looking to expand AI training and inference, and manage other high-computing workloads.
Demand for the company's products has been spectacular, and that has fueled demand for the stock, which has driven its price higher by 1,300% in the past five years (as of Oct. 9). Given the monster gains already attained, should you buy Nvidia shares right now?
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A computer with an Nvidia GPU. Image source: Nvidia.
Nvidia's stock trades at a reasonable valuation
It might be crazy to believe that a stock that has climbed so much in such a short period of time still has upside. But this is the case with Nvidia.
That's because the valuation is far from being demanding. Shares trade at a forward price-to-earnings ratio of 30 (as of Oct. 9). The multiple's 35% premium to the S&P 500 is totally justified given how dominant the company has become.
The poster child of the AI boom
In recent years, Nvidia's revenue and profits have rocketed higher, thanks to the gargantuan sums of capital that are being invested to build out AI infrastructure. And analysts' forecasts strongly suggest the capital spending isn't going to slow down anytime soon.
It doesn't matter which company introduces the best AI-powered products and services and becomes the winner during this tech shift. Nvidia is already well-positioned as the leading AI pick-and-shovel opportunity.
Should you invest $1,000 in Nvidia right now?
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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