3 Reasons Nvidia Is a Must-Buy for Long-Term Investors

Nvidia (NASDAQ: NVDA) has been one of the best-performing stocks over the past few years. However, with artificial intelligence (AI) still looking like it is in its early days, the stock looks like it should continue to be a winner over the long term.

Let's look at three reasons Nvidia is a must-buy for long-term investors.

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1. AI infrastructure spending set to continue to expand

The biggest driver of Nvidia's growth will continue to come from AI infrastructure spending. The company's graphics processing units (GPUs) have become the backbone of AI training and inference and, as such, tend to greatly benefit from increased AI infrastructure spending.

Major tech companies and AI start-ups in the U.S. have needed exponentially more computing power and, thus, GPUs to train their AI models to make them more advanced. This can be seen in Meta Platforms using 10 times the GPUs to train its Llama 4 model compared to its Llama 3 model and Elon Musk-backed xAI training its latest AI model by ramping up the GPUs from 20,000 GPUs used to train Grok 2 to eventually 200,000 GPUs to finish Grok 3's training.

China's DeepSeek AI model, which the company claimed was trained for less than $6 million, has raised some questions about future spending. Leading tech cloud computing companies such as Amazon stated that lower per-unit AI costs would lead to increased AI infrastructure spending. Meanwhile, experts have questioned the true costs of building DeepSeek's model, with independent semiconductor research company SemiAnalysis estimating it really cost closer to $1.3 billion to develop.

At the same time, the big three cloud computing companies are greatly ramping up AI infrastructure spending this year. Combined, Amazon, Microsoft, and Alphabet plan to spend more than $250 billion in growth capital expenditure (capex) in 2025, mostly on AI infrastructure. Meanwhile, Meta Platforms has said it is looking to boost its growth capex to between $60 billion and $65 billion, up from $39 billion in 2024. In addition, a consortium of companies backed by Japan's SoftBank pledged to spend $500 billion on AI infrastructure in the next few years in the U.S. as part of Project Stargate.

Right now, AI infrastructure spending is only increasing, and Nvidia looks poised to be the biggest winner.

Image source: Getty Images.

2. Dominant market position

Nvidia is a big AI winner because of its dominant market position in GPUs, with an approximate 90% market share. This dominance stems from the wide moat the company has created through its CUDA software platform. GPUs were originally designed to help speed up graphics rendering in video games, hence their name.

However, Nvidia developed its CUDA software platform back around 2006 to allow developers to program its chips for other tasks. As such, developers learned to program GPUs using CUDA, making it the standard platform for programming GPUs for tasks other than video games. Over the years, Nvidia expanded its software lead through CUDA X, a set of microservices, libraries, tools, and technologies designed specifically for AI and high-performance computing built on top of CUDA.

SemiAnalysis highlighted Nvidia's wide moat at the end of 2024 when it tested its GPUs against Advanced Micro Devices' (NASDAQ: AMD) MI300X GPU. It said it needed multiple AMD engineers to fix software bugs it ran into and that its chip was not usable out of the box for AI training. Meanwhile, it called Nvidia's out-of-the-box experience "amazing."

Nvidia isn't sitting still, though. The company has upped its development cycle from every two years to about once a year to continue to drive innovation and stay on top while continuing to improve its software. This should continue to give the company solid pricing power moving forward.

3. Inexpensive valuation

Despite Nvidia's strong performance over the past few years, its stock is still attractively priced. It trades at a forward price-to-earnings (P/E) ratio of 25 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.5. PEGs below 1 usually indicate a stock is undervalued, while growth stocks often have PEGs well above 1.

NVDA PE Ratio (Forward 1y) data by YCharts. PE Ratio = price-to-earnings ratio. PEG Ratio = price/earnings-to-growth ratio.

Meanwhile, Nvidia has been a growth machine, with the company set to more than double its revenue for the second year in a row in its fiscal 2025 (ending in January). Analysts are currently looking for the company to grow revenue by more than 50% in fiscal 2026 and another 20% in fiscal 2027.

All in all, Nvidia continues to have a huge opportunity in front of it while the stock remains attractively priced. That makes it a buy for long-term investors.

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*Stock Advisor returns as of February 21, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, 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. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.