Will Nvidia Stay on Top? Evaluating Buy, Sell, and Hold Options
Nvidia (NASDAQ: NVDA) has become a standout performer in 2024, surging over 185% year-to-date. This remarkable performance has positioned Nvidia among the largest companies globally based on market capitalization.
However, as investors look to the future, many wonder if Nvidia’s stock remains a buy, sell, or hold. Below, we explore each option to provide clarity.
Reasons to Consider Selling Nvidia
The argument for selling Nvidia centers around potential future demand for its graphic processing units (GPUs). While current interest in its artificial intelligence (AI) chips is strong, many are questioning how long this demand will continue.
A competitive race is underway among various tech firms aiming to develop superior AI models, which inherently require significant computing power and GPUs. If these models quickly achieve their goals, spending on AI training—an essential driver of Nvidia’s GPU sales—might begin to wane.
Additionally, Advanced Micro Devices has carved a niche in AI infrastructure, specifically in the inference segment, while companies like Broadcom are pushing tailored AI chips. Although Nvidia currently dominates AI training, a shift in industry focus towards inference could create challenges.
Should this scenario occur, Nvidia could face declining sales and earnings, marking it as a stock to sell.
Image source: Getty Images.
Reasons to Consider Buying Nvidia
Conversely, proponents of buying Nvidia stress the insatiable demand for its chips, with no indicators of a slowdown. As AI models evolve, they require not just more but exponentially greater computing power and GPUs.
For instance, xAI’s Grok 3 requires five times more GPUs than Grok 2 for training, while Alphabet indicated that its Llama 4 model will need up to ten times the computing power of Llama 3. Furthermore, Oracle has stated that AI infrastructure spending is expected to remain robust over the next five to ten years, with Nvidia’s clients projecting increases in their AI-related budgets for 2025.
In the previous quarter, Nvidia also highlighted its leadership in AI inference, asserting its strong base of enterprise and industrial clients, which may represent the next significant wave of AI demand.
Nvidia retains a competitive edge in the GPU market through its widely-used CUDA software platform, which has become a standard for developers. It has updated its product line yearly, enhancing its technology and maintaining pricing power.
Moreover, despite impressive gains this year, Nvidia’s stock appears attractively valued with a forward price-to-earnings (P/E) ratio of around 31 based on 2025 estimates and a price/earnings-to-growth (PEG) ratio of roughly 1, which generally signals undervaluation.
NVDA PE Ratio (Forward 1y) data by YCharts
Reasons to Hold Nvidia
Given Nvidia’s significant price increases in the past few years, it may be sensible for current investors to take some profits while retaining a portion of their shares. This approach aligns with prudent investment strategies.
Investors can observe how the buy and sell arguments develop in the future before making further decisions.
Conclusion
For those who invested in Nvidia early, consider trimming your holdings while maintaining a portion. New investors may still find an entry point appealing. Indicators suggest strong AI infrastructure spending in the coming years, positioning Nvidia as a principal beneficiary. Furthermore, the stock remains reasonably priced despite recent price increases.
Is $1,000 Investment in Nvidia Wise Right Now?
Before purchasing Nvidia stock, keep the following in mind:
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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, Nvidia, and Oracle. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
