Is Nvidia Still a Smart Investment Today?

Investing in the stock market doesn’t require a lot of money. Even a $500 investment can grow significantly over time with the right stock choices. This strategy is a powerful way to build wealth for retirement. However, investing comes with risks, and it’s wise to have a balanced portfolio that includes a mix of high-risk growth stocks and stable, dividend-paying companies.

Determining the right balance of higher-risk stocks depends on various factors, including your age, personal circumstances, and risk tolerance. One stock that many investors should consider, even with a modest amount like $500, is Nvidia (NASDAQ: NVDA).

Have Investors Missed the Boat?

Those who have tracked Nvidia’s rapid growth may think it’s too late to invest. Recently, its stock had a price-to-earnings (P/E) ratio exceeding 60 and reached an all-time high, having tripled in value over the past year.

Currently, Nvidia boasts a market cap of approximately $3.2 trillion. The company reported sales of about $56 billion in the first half of this fiscal year, a remarkable 170% increase compared to last year. Nevertheless, this leads to a price-to-sales (P/S) ratio nearing 35, an exceptionally high figure for a large, established business. Given this growth, revenue rates are expected to slow down. Nvidia anticipates about 8% sequential growth for the quarter ending in late October.

Despite having some growth challenges, Nvidia still has opportunities for expansion. For investors willing to navigate potential volatility, considering a $500 investment in Nvidia could still be worthwhile.

Image source: Nvidia.

Nvidia’s Unique Advantage

Nvidia is not idling, even as demand for its artificial intelligence (AI) products outstrips supply. The company has begun shipping its latest Blackwell GPUs (graphics processing units) in large quantities and plans to launch another platform called Rubin, continuing its tradition of annual updates with advanced chips.

Competition is increasing, as high demand creates opportunities for others to provide solutions for the rapidly growing data centers. Nevertheless, Nvidia’s stronghold in the AI infrastructure keeps customers coming back.

CEO Jensen Huang discussed the ongoing potential for Nvidia in an interview. He emphasized the importance of ensuring compatibility across its AI infrastructure. The company’s CUDA (compute unified device architecture) software platform allows developers to innovate across different GPU-accelerated systems, forming the backbone of the GPU computing ecosystem.

This capability means that even as Nvidia rolls out newer chips, older models remain valuable for many applications. Large-scale data center managers, also known as hyperscalers, find themselves reliant on CUDA, which strengthens Nvidia’s position in the market.

Training is just one step. … You really want to create a system that accelerates every single step of that. … Our perspective manifests itself into the product. … We accelerate everything. That entire thing [flywheel] is CUDA accelerated.

Investors Still Have Time

The journey towards expanding AI applications offers Nvidia a promising future. As a pioneer in the AI space, its products are becoming deeply integrated into customer operations.

While Nvidia’s stock may seem expensive and could be subject to volatility, long-term investors shouldn’t feel they’ve missed their chance. Nvidia remains a compelling growth stock that could benefit a diversely constructed portfolio.

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

Before making any decisions about investing in Nvidia, consider this:

The Motley Fool Stock Advisor team recently selected what they believe are the 10 best stocks to buy now, and Nvidia was not included. The chosen stocks are positioned for excellent returns in the years to come.

For perspective, if you had invested $1,000 in Nvidia back on April 15, 2005, following their recommendation, it would be worth about $839,122*.

Stock Advisor offers an investment strategy that guides users on portfolio building, provides ongoing analyst updates, and shares two new stock picks each month. The service has significantly outperformed the S&P 500 since its inception in 2002.

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*Stock Advisor returns as of October 14, 2024

Howard Smith has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. 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.