Think You Missed the Boat on Nvidia? Here's the No. 1 Reason It Could Keep Climbing.
Key Points
Nvidia stock is up over 1,400% in the past three years.
Nvidia is the go-to provider for much of the hardware used in AI development.
The rapid build-out of new data centers should be a financial windfall for the chip company.
- 10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA) has been one of the largest beneficiaries of the recent artificial intelligence (AI) boom that has happened over the past few years. Its stock is up over 1,400% in three years, far outperforming the S&P 500 index, up 79% in that span.
Nvidia's run has obviously been good for existing shareholders, but that doesn't mean there is no opportunity for those now looking to get into the stock. The reason it could keep climbing long term comes down to the expected growth of AI infrastructure and Nvidia's role in that.
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Image source: Nvidia.
Many notable companies are building new data centers because of how valuable they are to AI training and scaling. Nvidia is the backbone of these facilities, so it gets a natural boost from these new build-outs. Inside them are Nvidia's GPUs, networking hardware, and software platforms. It's the go-to for lots of hardware used in AI development.
CEO Jensen Huang claimed during the most recent earnings call that Nvidia is winning a $35 billion revenue share of every gigawatt AI data center, which costs $50 billion to $60 billion.
That explains Nvidia's data center revenue was up 56% year over year to $41.1 billion in its latest fiscal quarter, composing over 88% of total revenue. As tech companies continue to spend on AI infrastructure, Nvidia's earnings growth will continue. It's reasonable to expect year-over-year growth to slow down, but that doesn't take away from its future as a key player in the field.
Nvidia stock is priced at a premium, so if you're worried about any sudden pullbacks or corrections, try dollar-cost averaging your way into a stake instead of investing a lump sum.
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Stefon Walters 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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