Nvidia: The AI Powerhouse Driving Stock Market Gains

Nvidia (NASDAQ: NVDA) has emerged as the standout stock of 2023, boasting remarkable gains along the way. The company, recognized as a leader in artificial intelligence (AI), has seen its sales and earnings grow substantially. So far this year, Nvidia’s share price has surged by approximately 180%.

This performance is just a chapter in an extraordinary story. Nvidia’s stock price has skyrocketed nearly 860% since the start of 2023 and an astonishing 2,650% over the past five years. As a result of these extraordinary gains, the company’s price-to-earnings multiple has risen to 66.

Strong Growth Supports Nvidia’s Valuation

Despite concerns about the rapid rise in Nvidia’s stock price, its gains align with the company’s recent business performance. Revenue rose 205% year-over-year in the first half of fiscal 2025 (the six months ending July 28, 2024), while earnings per share jumped 285% during the same period.

Market analysts expect this impressive growth to continue. Currently, Nvidia is trading at a forward price/earnings-to-growth (PEG) ratio of approximately 0.36. Generally, a PEG ratio under 1.0 is considered a sign that a stock may be undervalued, as it indicates high earnings growth relative to its price-based valuation.

Data by YCharts.

Nvidia’s sales and earnings will inevitably slow down at some point. However, the company’s strong market position, growth momentum, and favorable PEG ratio indicate that the stock may still have further growth potential. With the anticipated launch of the next-generation Blackwell processors later this year, Nvidia could enjoy another boost in sales and earnings.

While spending on graphics processing units (GPUs) for AI applications may experience cyclical fluctuations, the AI sector is still in its infancy. Nvidia remains a crucial player in this evolving landscape.

Is Now the Right Time to Invest $1,000 in Nvidia?

Before making a decision on investing in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team recently highlighted their list of the 10 best stocks to buy right now… and Nvidia did not make the cut. The selected stocks have the potential to deliver impressive returns in the coming years.

Reflect on when Nvidia was included on April 15, 2005… with a $1,000 investment at that time, you’d now have $829,746!*

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Keith Noonan 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.

The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.