Nvidia: The AI Leader Poised for Future Gains

Growth stocks have been at the forefront of the S&P 500‘s recent successes, contributing to a powerful bull market at the beginning of the year while pushing it to new heights. Many of these promising companies hail from the thriving technology sector, particularly focused on artificial intelligence (AI). If AI fulfills its potential to transform businesses and everyday life, investors in these stocks could see substantial rewards in the coming years.

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The Importance of a Diversified Portfolio

However, when considering potentially becoming a millionaire through stock investments, it’s crucial to understand that this should be viewed within the context of a diversified portfolio built over several years. It’s highly risky to invest all your money into one stock, regardless of its standing. Instead, aim to invest in multiple quality stocks, including one standout growth stock, and hold these investments for a minimum of five to ten years.

Let’s explore this standout stock—a company that has increased by 2,600% over the past five years and is on track for a 190% gain this year. This stock, which is likely to have already created millionaires, is Nvidia (NASDAQ: NVDA).

Nvidia continually grabs headlines with its impressive revenue growth and profitability. In its latest quarter, revenue soared to over $35 billion, boasting a gross margin in the mid-70% range. Looking ahead, as Nvidia rolls out its new Blackwell architecture, the company anticipates maintaining margins around the low-70% range, signifying its strong financial health.

Innovation and Market Dominance

What sets Nvidia apart in the crowded AI market? The company was an early player with its graphics processing units (GPUs), which are capable of performing numerous tasks simultaneously. This adaptability makes them ideal for AI applications, including crucial functions like model training and inferencing. By the time competitors launched their own high-performance AI chips, Nvidia had already secured a leading position, and its commitment to continuous innovation bodes well for maintaining this advantage.

Nvidia commits to annual updates for its GPUs, which keeps competitors at bay. Currently, the company is gearing up for what could be its biggest product launch yet: the Blackwell architecture. This new platform features customizable components, from chips to networking options. Demand for Blackwell has been “staggering,” according to comments made during Nvidia’s latest earnings call, as it rushes to fulfill orders from major tech companies.

These companies recognize the value of Nvidia’s platform, driven by its superior performance, and are willing to invest more for a competitive edge in the AI market.

At present, Nvidia shares trade at 49 times forward earnings estimates, which appears justified considering the company’s growth outlook and the nascent stage of the AI market. Projections indicate that the AI market could expand from $200 billion today to $1 trillion by the end of this decade, positioning Nvidia to reap significant benefits.

Investors could discover a path toward substantial gains by adding this leading AI stock to their portfolios for the long term.

Considering a $1,000 Investment in Nvidia?

Before investing in Nvidia, keep this in mind:

The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks to buy right now—and Nvidia did not make that list. The selected stocks have the potential for extraordinary returns in the upcoming years.

If you had invested in Nvidia when it was recommended on April 15, 2005, a $1,000 investment would be worth approximately $872,947 now!*

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*Stock Advisor returns as of December 2, 2024

Adria Cimino 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 are those of the author and do not necessarily reflect those of Nasdaq, Inc.