Should You Buy Nvidia Stock (NVDA) in December?
Key Points
The stock has averaged triple-digit annual gains over the past few years.
Its chips are used for artificial technology, which has been exploding.
The company is adding more offerings, too.
- 10 stocks we like better than Nvidia ›
December is a month when many of us buy many gifts for our loved ones. If you're looking for gifts for yourself, though, you may be thinking of adding a promising growth stock to your portfolio. And if you've been paying any attention at all to the stock world over the past year, you may be wondering whether you should buy some shares of the semiconductor giant Nvidia (NASDAQ: NVDA).
The stock has been on fire -- in a good way -- for a long time, averaging annual gains of[SM1] 52% over the past 15 years and averaging 119% over the past three years. Better still, after all that torrid growth, it still seems reasonably valued, with a recent forward-looking price-to-earnings (P/E) ratio of[SM2] 23 is well below the five-year average of 38.
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People will occasionally express doubts about whether the company can continue dominating in the chip arena, given that it does face some competition, but Nvidia keeps growing rapidly, exceeding many expectations. That's largely because it's a leader in graphics processing units (GPUs) not only for games but also for data centers -- which are booming, as much of our artificial intelligence (AI) activity runs through them.
Image source: Getty Images.
Meanwhile, Nvidia is expanding its scope to include networking, software, and services, which can diversify its revenue and create a stickier ecosystem for customers.
No stock is a sure thing, and growth stocks often fall harder in market pullbacks than other stocks, but Nvidia seems to me to still be quite promising. You might want to dig deeper into it and then buy some shares.
If you're skittish, though, you might consider opting for an exchange-traded fund (ETF) that invests in a bunch of chip stocks. The iShares Semiconductor ETF (NASDAQ: SOXX), for example, features around 30 stocks, with top ones including Nvidia, Advanced Micro Devices and Broadcom.
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Selena Maranjian has positions in Advanced Micro Devices, Broadcom, Nvidia, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and iShares Trust - iShares Semiconductor ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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