The Future of AI: Nvidia Remains a Key Investment

AI stocks faced significant challenges in 2025, with numerous companies experiencing losses amounting to hundreds of billions of dollars within the first quarter. Despite this downturn, long-term prospects for the AI sector appear robust. In just a few years, demand for AI services is expected to escalate, positioning Nvidia (NASDAQ: NVDA) as a strong buy in the AI market.

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Nvidia: A Leader in AI Investments

Nvidia stands out as a frontrunner among AI stocks. For those monitoring the industry, the company’s substantial growth potential is well-known. Almost all AI technologies depend on robust training and ample computing power, primarily delivered by graphics processing units (GPUs). Nvidia commands a dominant market share of approximately 70% for GPUs used in AI applications, with even higher percentages in data centers that are vital for the AI infrastructure.

Investing in Nvidia effectively places your portfolio at the heart of the AI sector. As AI continues to advance, reliance on Nvidia’s chips will likely persist. Despite a higher price point, Nvidia’s GPUs outperform those of competitors, primarily due to the company’s early and strategic investments in this technology. Furthermore, Nvidia’s proprietary parallel computing platform, CUDA, which debuted in 2006, has allowed developers to enhance the capabilities of its chips. This strategy not only yields performance improvements but also fosters customer loyalty.

As developers increasingly utilize CUDA and tailor their environments to maximize its benefits, their products become integrated into Nvidia’s ecosystem, creating customer retention that bolsters chip demand.

However, Nvidia’s stock has recently seen a rare dip in 2025, dropping nearly 20%. This situation might provide an opportunity to purchase shares at a reduced price before the anticipated long-term gains.

Is It Time to Invest in Nvidia? Assessing the Opportunity

Valuing Nvidia presents a challenge. While sales are rapidly increasing, much of the growth is projected to occur in the future. The specific landscape of the AI industry a decade from now remains uncertain, including its potential size and the speed of its progression. To better understand Nvidia’s position, we can compare it with another major player in the chip industry, Advanced Micro Devices (AMD).

NVDA PS Ratio data by YCharts; TTM = trailing 12 months.

Nvidia’s price-to-sales (P/S) ratio has decreased from its peaks in 2021 and 2024. This decline is not unique, as other chipmakers like AMD have also seen reductions in their valuations. Currently, Nvidia shares are priced at three times higher than AMD on a P/S basis; however, Nvidia’s anticipated growth for the next quarter is expected to exceed AMD’s by over twofold. Their impressive growth figures from 2023 and 2024 further emphasize Nvidia’s market performance.

Nevertheless, Nvidia shares are considered expensive, trading at 21.6 times sales, with a market capitalization close to $3 trillion. Although the company’s current product lineup commands a premium price, competition from AMD and Intel is intensifying, with both companies investing heavily to enhance their chip performance. Mergers among competitors to better challenge Nvidia’s dominance are also conceivable.

In light of these dynamics, investors who are optimistic about AI should adopt a diversified investment strategy. Nvidia represents a fantastic opportunity for patient investors prepared to endure potential market fluctuations. However, it’s essential to remember that the AI landscape will likely evolve with various emerging competitors. Diversifying among several publicly traded chipmakers could provide broader exposure to the AI sector’s growth rather than being tied to one company’s fate.

Seize the Opportunity for Potential Gains

If you’ve ever felt you’ve missed out on lucrative stock opportunities, this might be your moment. Our team of analysts occasionally issues a “Double Down” Stock recommendation for companies they believe are on the brink of substantial growth. If you’re worried that the investment wave has already passed, this could be the perfect time to make a move before the opportunity slips away. The statistics reflect powerful potential:

• Nvidia: If you invested $1,000 when our team doubled down in 2009, you’d have $284,402!*
• Apple: If you invested $1,000 when our team doubled down in 2008, you’d have $41,312!*
• Netflix: If you invested $1,000 when our team doubled down in 2004, you’d have $503,617!*

Currently, we are issuing “Double Down” alerts for three incredible companies, and opportunities like this are rare.

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*Stock Advisor returns as of March 24, 2025

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends the following options: short May 2025 $30 calls on Intel. 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.