Nvidia Corporation‘s (NASDAQ: NVDA) shares fell 3.4% after the company released its fiscal 2025 third-quarter results last week, creating what I view as a buying opportunity. Analysts anticipate that Nvidia’s revenue growth will decline from 111.9% in fiscal 2025 to 49.2% in fiscal 2026; however, I am confident in the company’s strong fundamentals moving forward.

My optimism is particularly fueled by the prospects in artificial intelligence (AI). Cloud service providers are poised to invest $267 billion in AI infrastructure in the coming year, representing a significant 33.5% increase from current levels. Nvidia, holding an impressive 80% market share in AI chips, is well-positioned to benefit from what Amazon CEO Andy Jassy describes as a “once-in-a-lifetime” opportunity.

Image Source: Getty Images.

Let’s explore why I continue to invest in this AI leader, even as growth rates show signs of moderation.

Nvidia’s Dominance in AI Infrastructure

The recent earnings report underscores Nvidia’s leadership in AI computing. The company achieved record data center revenue of $30.8 billion in its fiscal 2025 third quarter, marking a remarkable 112% increase from the previous year. This extraordinary growth indicates a strong demand from cloud providers eager to enhance their AI applications.

Microsoft plans to allocate $80 billion to overall infrastructure spending in 2024, while Alphabet and Amazon are directing $51 billion and $75 billion, respectively, towards similar capital investments, with a key focus on AI.

CEO Jensen Huang described the current demand for AI technology as “insane.” Furthermore, the market for AI accelerators is expected to grow over 60% annually, reaching $500 billion by 2028, according to Advanced Micro Devices (AMD) CEO Lisa Su. This rapid market growth is not merely based on current needs but is also fueled by expectations of future technological breakthroughs.

Valuation Amidst the AI Surge

Currently, Nvidia is trading at 33.6 times its forward earnings. While this is higher than the S&P 500 average of 23.8, the valuation appears justified given Nvidia’s growth potential. A company reporting year-over-year revenue growth exceeding 100% and maintaining industry-leading profit margins is deserving of a premium valuation.

Moreover, Nvidia’s pricing power is noteworthy. The company’s gross margins reached an impressive 74.6% in the last quarter on a Generally Accepted Accounting Principles (GAAP) basis, highlighting its operational efficiency as it ramps up production to meet soaring demand. This strength stems from ongoing technological advancements.

Evidence of this innovation is clear within Nvidia’s offerings. The H200 chip, which boosts inference performance by up to 2 times while reducing overall costs by 50%, has gained traction and is being utilized by cloud giants like AWS, CoreWeave, and Microsoft Azure. At the same time, Nvidia’s next-generation Blackwell platform is now fully operational, promising even greater performance improvements in the future.

Is Now the Right Time to Invest?

Though Nvidia’s growth rates may be moderating from their peak, I firmly believe in the company’s long-term potential. With major cloud providers accelerating investments in AI and enterprise adoption still at an early stage, the market is ripe for continued growth. CEO Jensen Huang mentioned that “$1 trillion worth of computing systems and data centers around the world are now being modernized for machine learning.”

Additionally, the sector is approaching what some term a “Gutenberg moment,” as the possibility of developing artificial general intelligence (AGI)—systems that can perform any intellectual task like humans—could materialize within the next two to three years. Such a breakthrough would necessitate immense computing resources, likely leading to even greater demand for Nvidia’s specialized chips.

While slower growth may concern some investors, the broader perspective reveals a much larger opportunity. Given Nvidia’s strong market presence, advancing technology, and the ongoing AI infrastructure expansion, I am seizing this recent dip to increase my investment in this AI powerhouse.

This May Be Your Chance

Do you sometimes feel you missed out on investing in top-performing stocks? If so, keep reading.

Occasionally, our expert analysts designate a “Double Down” stock—their recommendation for companies on the verge of significant growth. If you’re concerned you’ve missed a golden opportunity, now could be the prime moment to invest. Here are some compelling numbers:

• Nvidia: If you had invested $1,000 when we doubled down in 2009, you’d have $368,053!*
• Apple: If you had invested $1,000 when we doubled down in 2008, you’d have $43,533!*
• Netflix: If you had invested $1,000 when we doubled down in 2004, you’d have $484,170!*

Currently, we are issuing “Double Down” alerts for three outstanding companies, and this opportunity may not last long.

See 3 “Double Down” stocks »

*Stock Advisor returns as of November 25, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a member of The Motley Fool’s board of directors. George Budwell holds positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool also recommends options on Microsoft. The Motley Fool has a disclosure policy.

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