Nvidia's AI Dominance and Investment Landscape: A Comprehensive Analysis

2 Artificial Intelligence Stocks I'm Loading Up On Right Now | The Motley Fool

Artificial intelligence (AI) stocks have been a driving force behind the S&P 500's impressive performance recently. The benchmark index has climbed over 21% year to date and gained more than 34% in the past 12 months. Notably, it has already set 41 new record highs in 2024. This remarkable run is largely attributed to AI's projected multitrillion-dollar impact on the global economy by the mid-2030s. The AI revolution is reshaping industries across the board, from healthcare and finance to manufacturing and transportation. As companies increasingly integrate AI into their operations, demand for advanced AI hardware and infrastructure continues to grow at a robust pace. This trend is creating significant opportunities for investors who can identify promising players in this rapidly evolving field. While some analysts express concerns that AI stocks may be overbought at current levels, I see potential for further growth. The development of AI-powered agents and advanced robotics soon could spark another rally in AI-centric equities. Additionally, ongoing advancements in AI models and applications are likely to sustain demand for AI-related products and services. With this perspective, I'm building positions in two AI stocks that I believe have room to run. These companies represent different facets of the AI industry. One is an established leader in AI chips, while the other is an emerging player in energy-efficient semiconductor technology that's crucial for AI infrastructure. Here's a closer look at these potential opportunities. Nvidia (NVDA 1.70%) has cemented its position as the dominant force in AI chips. The company's graphics processing units (GPUs) are essential for training and running large language models, the backbone of today's AI revolution. Nvidia's first-mover advantage and relentless innovation have created a formidable moat in the AI chip market. Nvidia's investment appeal remains compelling, primarily due to its skyrocketing data center revenue. In the latest quarter, this segment experienced a staggering 154% year-over-year growth. Most impressively, this trend shows no signs of abating, fueled by an insatiable demand for AI computing power across various industries, including cloud computing, autonomous vehicles, and scientific research. The catalyst? An AI arms race has erupted among major U.S. tech firms and between the U.S. and China on a global scale. This competition is driving massive investments in AI infrastructure, with Nvidia's chips at the epicenter of this technological battle. Adding momentum, the company's upcoming next-generation chips, Blackwell and Rubin, are poised to further solidify its market leadership. These new chips promise significant performance improvements and energy efficiency gains, potentially driving another wave of upgrades and sales. Nvidia's strong brand, technological edge, and extensive ecosystem create high barriers to entry for potential competitors. The company's CUDA software platform has become an industry standard, making it challenging for rivals to displace Nvidia's GPUs in AI applications. This software moat complements Nvidia's hardware advantages, creating a virtuous cycle that reinforces its market position. While this high-flying tech stock may not double again in the next 12 months, it still possesses substantial growth potential for the above reasons. The AI revolution is in its nascent stages, and Nvidia is well-positioned to capitalize on the long-term growth of this transformative technology. Consequently, investors who hold the stock through the end of the decade could see considerable returns as AI reshapes the global economy and our daily lives. Navitas Semiconductor (NVTS 5.00%) is an emerging player in the AI landscape. The company specializes in gallium nitride (GaN) power semiconductors, which offer superior efficiency, compared to traditional silicon-based chips. This technological breakthrough could be a game changer for the AI industry, where power consumption and heat generation are significant challenges. As AI applications become increasingly power-hungry, energy efficiency is paramount. Navitas' GaN chips are well-positioned to play a crucial role in powering AI data centers and other high-performance computing applications, potentially revolutionizing the industry's energy consumption. These chips operate at higher switching frequencies with lower power losses, thanks to GaN's superior electron mobility and breakdown strength, making them ideal for the demanding requirements of AI hardware. However, investors should be aware of the company's history of shareholder dilution. Over the past three years, Navitas has significantly increased its outstanding share count, as illustrated in the graph below. This practice, while necessary for early-stage tech companies, often acts as a drag on a company's share price. Despite this drawback, Wall Street projects a robust 37.4% increase in 2025 sales, signaling strong demand for energy-efficient chips and potentially reducing the company's need for future shareholder dilution. Navitas represents an intriguing AI investment opportunity, albeit one that warrants a cautious approach. As such, I plan to start building a small position in the GaN power semiconductor specialist over the next few months. If the stock shows signs of gaining positive momentum, I may consider increasing my stake more significantly.

Forget Nvidia: 2 Artificial Intelligence (AI) Stocks to Buy Instead | The Motley Fool

Check out this "Magnificent Seven" alternative and a small company you may not know. Don't let the title of this article mislead you; Nvidia (NVDA 2.18%) is perhaps the most important company on the planet today. Its graphic processing units (GPUs) are critical for high-performance data centers, which power vital applications and artificial intelligence (AI) and machine learning (ML). The company is also partially responsible for the stock market's all-time highs since it makes up more than 7% of the Nasdaq and 6% of the S&P 500. Nvidia's revenue growth is remarkable, as shown below. But this doesn't mean it is the best stock to buy now. The stock is expensive, and the competition is fierce. Of the $96 billion in sales shown above, 40% reportedly comes from other big tech companies, which are racing to develop their own competing products. Nvidia isn't a bad investment, but others have more potential. Here are two suggestions. Let's start with Amazon (AMZN -0.74%). Amazon benefits tremendously from AI. First, Amazon Web Services (AWS), the world's leading cloud services provider, continues growing as data needs increase. Generative AI requires ridiculous amounts of data and processing power. Amazon's total revenue reached $148 billion last quarter on 10% growth, but the highly profitable AWS segment grew 19% to $26 billion, showcasing its long runway. Amazon Bedrock is another AI application that lets customers create custom applications using pre-fab foundational models running on AWS. Amazon is also involved in AI through advertising, logistics, and developing chips and accelerators. Also, its product business should benefit from lower interest rates that will boost consumers and the economy. What separates Amazon from some other Magnificent Seven stocks is its undervaluation. The stock is well below its three-year average valuation based on sales, cash flow, operating income, and earnings, as depicted below. The undervaluation remains true based on five-year averages, making the stock enticing for investors. Let's move from a company with a market cap of more than $2 trillion to one of less than $1 billion. Technology is constantly changing the way we conduct everyday transactions. For instance, consider the difference between today's self-checkout lines and debit and credit card payments versus human cashiers and people writing paper checks for groceries. One thing that hasn't changed in a long time is how we securely get into venues -- until now. Evolv Technology (EVLV -0.95%) wants to make the old single-file, empty your pockets, walk through a metal detector, and then get a wand scan security obsolete using AI. Evolv systems use AI to alert security staff of concealed weapons while distinguishing between benign items like wallets and keys. Its sensors detect things like metal composition, shape, and size without people going through them single-file. You will see Evolv systems in schools, hospitals, stadiums, and other large venues. As shown below, subscriptions have skyrocketed. The company has more than 800 customers and is being tested in New York's subway system. Annual recurring revenue (ARR) reached $89 million last quarter, up 64% from the prior year, and management forecasts $100 million in ARR by year end. Evolv has a market cap of only $700 million; however, the stock is difficult to value because the company isn't profitable during this high-growth phase. Its ultimate success (or failure) will boil down to securing customers and maintaining cutting-edge technology. Smaller companies like Evolv are riskier investments than most large-cap stocks, but the long-term upside potential is enormous. Nvidia is a terrific company, and its stock price reflects this. Amazon and Evolv are excellent alternatives for tech investors.

10 Things to Know About Nvidia Before You Buy or Sell | The Motley Fool

Nvidia (NVDA 3.96%) has been one of the hottest stocks on the planet in recent times. The shares have soared 2,500% over the past 5 years -- and just this year they've climbed more than 130%. This is thanks to the company's dominance in the high-growth artificial intelligence (AI) chip market. Nvidia's sales of chips and other AI products and services have helped earnings climb into the billions of dollars. And this momentum may be in its early days considering forecasts for AI growth. The AI market is expected to expand from about $200 billion today to $1 trillion by the end of the decade. As a major player in the space, Nvidia could continue to generate explosive earnings gains. That said, some investors have worried about increasing competition in the market and how that could impact Nvidia's pricing power. Before you decide to buy or sell this high-profile stock, here are 10 things you need to know. Nvidia's next big release is the Blackwell architecture and most powerful chip ever -- a platform that could be a game changer for the company and its customers. The company recently said the launch is on track, quelling rumors about delays. (Nvidia just implemented one change to improve production yields.) The Blackwell production ramp is set to start in the fourth quarter, and the company even predicts "several billion dollars" of Blackwell revenue in that period. Blackwell is coming, but earlier architecture Hopper isn't going away. Though Blackwell is more powerful, Hopper remains state of the art, and customers, eager to advance their AI projects, are flocking to it. Nvidia's expectation of 80% year-over-year revenue growth in the upcoming quarter is thanks to demand for Hopper, meaning this platform continues to be a key revenue driver for the company. Enterprise software will be a significant growth driver, the company has said in the past, and now Nvidia's efforts in this area are bearing fruit. Nvidia AI Enterprise, an "operating system" for companies' AI projects, streamlines the development of generative AI applications. And Nvidia expects its software to finish the year with a $2 billion annual-revenue run rate, "notably contributing to growth," the company says. Since the U.S. imposed a ban on chip exports to China, Nvidia has seen its revenue from that country drop. The company has developed other chips specifically for China that meet U.S. export requirements, and in the latest earnings report, Nvidia said China was a "significant contributor" to data-center revenue. Still, China is bringing in much less revenue than before the export controls, and the company expects the market to remain highly competitive. Nvidia has said that "other Blackwells" are down the road following the upcoming Blackwell launch, meaning this top-tech company will keep on innovating. Nvidia has pledged to update its graphics processing units (GPUs) on an annual basis. This plan makes me confident about the company maintaining its leadership, and the new releases offer catalysts for stock performance. The data-center business may have become Nvidia's biggest, taking the reins from gaming, but this doesn't mean gaming's growth is over. The segment is still a key contributor, and in the most recent quarter, it posted a 16% increase to more than $2.8 billion. Today, the GeForce NOW library boasts a catalog of more than 2,000 titles for the biggest collection of any cloud-gaming provider. Yes, Nvidia faces competition from others, such as Advanced Micro Devices and Intel. But I don't expect this to hurt Nvidia -- for two reasons. First, market demand is so high that there is room for several participants. And second, Nvidia's focus on innovation, as mentioned above, and the fact that it already is the market leader mean it likely will continue to stay ahead when it comes to chip technology -- and that will make it hard to unseat the company. Nvidia's stellar track record when it comes to return on invested capital and free cash flow is a big positive. This shows it's investing wisely, and therefore benefiting from its investments over time, and is highly profitable. As we can see in the chart, below, even prior to the AI boom, Nvidia progressively grew these metrics, showing wise management across the business. Nvidia recently completed a 10-for-1 stock split, a move to lower the per-share price after its enormous gain so that a broader range of investors can get in on the stock. The company's board also approved a $50 billion share-repurchase authorization, adding to the remaining $7.5 billion already authorized. These two moves show confidence that the shares still have plenty of room to run. Nvidia isn't the cheapest stock around. But considering the positive points I mention here (and the fact that they outweigh the negative), the stock looks pretty reasonable today at 40 times forward-earnings estimates. And this is down from 50 times earlier this year. All of this means Nvidia, even after its enormous gains, still looks like a solid AI winner to buy and hold.

Prediction: This 1 Thing Will Help Nvidia Stock Soar in the Fourth Quarter | The Motley Fool

Nvidia (NVDA 2.18%) shares have roared higher over the past several years, thanks to the company's dominance in the artificial intelligence (AI) chip market -- it holds a more than 80% share. But recently, the stock has lost some of its momentum, falling more than 6% over the past month. Some investors have worried about growing competition in the chip market, and others fear that any slowdown in AI spending could hurt the company. In my opinion, these concerns are overdone and Nvidia still has plenty of fuel in the tank to climb both in the near term and over time. My prediction is that one thing, in particular, will help Nvidia stock soar in the fourth quarter and the recent loss of momentum is only temporary. Let's dive into this tech story that still has plenty of exciting chapters ahead. Just a few years ago, this technology giant's biggest source of revenue was the gaming industry. Nvidia's graphics processing units (GPUs) powered all of the action, due to their ability to handle multiple tasks simultaneously. It soon became clear that this profile made the GPU perfect for other uses, including AI. Nvidia turned its attention to this high-growth field, and its earnings took off, climbing in the triple digits quarter after quarter. Today, Nvidia's data center business -- the one that serves AI customers -- represents 87% of the company's total quarterly revenue. That's set to continue, considering the massive demand Nvidia's seeing and the general growth forecasts for the AI market, which is expected to expand from $200 billion today to more than $1 trillion by 2030. Of course, competitors do exist, but Nvidia is a step ahead when it comes to innovation. It also plans to update its GPUs on an annual basis, which should keep it in this top position. As for AI spending, my colleague Trevor Jennewine recently wrote about how spending on AI may gain more momentum over the coming years, representing great news for Nvidia. Now let's move on to my prediction. Yes, Nvidia shares have delivered a lackluster performance in recent weeks, but it's important to put that into perspective. The stock still has advanced 144% so far this year and has soared 2,700% over the past five years. My prediction is that this is a pause in the action, and in the fourth quarter, sales of Nvidia's new Blackwell architecture will help the stock roar higher. Nvidia said during its most recent earnings call that it plans to ramp up production of Blackwell in the fourth quarter and will record "several billion dollars" of revenue from it during that period. Nvidia won't report fiscal fourth-quarter earnings until early next year, but any communications from the company about the Blackwell release or talk in the market could happen much earlier -- and investors are known to react to any news. All of this may equal strong performance for Nvidia shares in the fourth quarter of this year as investors consider the company's message during the last earnings call -- and look ahead to Blackwell's contribution to the next fourth-quarter report. It's important to remember that Nvidia Chief Executive Officer (CEO) Jensen Huang said demand for Blackwell has surpassed supply, and he expects this to continue into the coming year, so it's clear that customers are rushing to get in on this new platform. I recently wrote about how two major technology players begged Huang for more GPUs, further illustrating how eager customers are to get Nvidia chips. All this makes me confident about Nvidia's long-term revenue potential in the AI market and the potential for its shares to soar over time, as well -- whether my near-term prediction is right or not. That means Nvidia still is a great stock to buy and hold for the long haul.

Nvidia Stock: Buy, Sell, or Hold? | The Motley Fool

Regarding this AI stock, a case can be made for each, but there is one right answer. Following its massive run over the past five years, perhaps no stock captures as much investor attention as Nvidia (NVDA 3.96%). The company has become the exemplar for the artificial intelligence (AI) infrastructure buildout, and no company has benefited from AI as much as Nvidia. Given that, it is unsurprising that many investors wonder if Nvidia stock is a buy, sell, or hold. Let's look at the cases for each. The buy case for Nvidia centers around the AI infrastructure buildout still being in its early days despite the massive demand the company has already seen for its graphics processing units (GPUs). And there is solid evidence to believe this is the case. As large language models (LLMs) become more sophisticated, they need more and more computing power -- which is provided by GPUs -- to be trained. This can be seen in newer LLMs not only needing more GPUs for training than their predecessors, but exponentially more. For example, xAI's Grok-3 AI model is set to train on 100,000 GPUs compared to Grok-2 being trained on 20,000 GPUs, while Meta Platforms has said its Llama 4 LLM would likely need 10 times the compute power as the Llama 3, which was trained on 16,000 GPUs. Meanwhile, capital expenditure (capex) on AI projects continues to rise, and the CEOs of both Alphabet and Meta have said that they think the biggest risk is underinvesting in AI. Meanwhile, Oracle CTO and Chairman Larry Ellison said on his company's most recent earnings call that he doesn't see spending on AI training slowing down over the next five to 10 years. As such, the comments from Nvidia's customers suggest that we are still in the early innings for the AI infrastructure buildout. Nvidia, meanwhile, has carved itself out as the dominant player in the GPU space due to its CUDA software being the de facto program with which developers have learned to program GPUs. At the same time, it has been at the forefront of innovation in the space and is looking to sell chips as well as entire GPU servers. The company has also accelerated its development cycle on the next generation of chips from once every two years to once a year, which should help it maintain its technological lead and pricing power. And as the cherry on top, Nvidia's stock is relatively cheap, trading at a forward price-to-earnings ratio (P/E) of only about 29 based on next year's analyst estimate, and a price/earnings-to-growth ratio (PEG) under 0.8. A PEG under 1 is generally considered undervalued, and growth stocks generally have PEGs well above 1. The sell case for Nvidia is that demand for GPUs and AI infrastructure is elevated. Once the initial euphoria is over, its sales could come crashing down from current levels. There is less computing power needed for AI inference compared to AI training. If AI models reach the point of being deemed good enough, then there could be a spending shift going more toward AI inference than training, and fewer GPUs would be needed. And while companies currently spend a tremendous amount of money building out infrastructure to handle AI applications, these companies need to be able to make money on their investments. Nvidia can't be the only AI winner; that needs to extend to its customers and its customers' customers as well. Otherwise, spending on AI will dramatically slow. So far, hyper scalers such as Microsoft and Alphabet have seen nice boosts in their cloud computing segments, although software and hardware companies have been a bit of a mixed bag. Many software companies at the forefront of AI have seen modest AI sales uplifts, such as Adobe and Microsoft. Yet it hasn't been dramatic, while there have been some initial worries over iPhone 16 sales, which were supposed to give Apple a lift due to the model's integration of AI features. If you already own Nvidia, there is a good case to be made to just hold the stock. In all likelihood, unless you just bought the stock recently, you probably have some nice gains that are likely to continue growing. Nvidia still has some potential upside ahead given its reasonable valuation and the AI boom looking like it could be in the early innings. In that case, while it is best to manage your position and make sure it hasn't become too large of your overall portfolio, investors likely would be well served to continue to hold the stock. While there is certainly a risk that spending on AI infrastructure will slow, the comments and actions from Nvidia's customers suggest that this does not appear likely to happen soon. As such, given its valuation and the growth prospects in front of the company, I would consider Nvidia stock a buy.