Nvidia (NASDAQ: NVDA) has hit record highs over the past year, becoming the poster child for a boom in the artificial intelligence (AI) market. Since the start of 2023, the chipmaker’s stock has soared 174%, while quarterly revenue and operating income have climbed 93% and 149%. Wall Street has rallied behind Nvidia, which has gained a majority market share in AI graphics processing units (GPUs) just as demand for those chips has soared.
Uncertainty over how long Nvidia can maintain its bullish trend weighed on its stock in late June and early July, when it fell to $118 per share from a high of $135 per share a few days earlier. However, its stock rebounded on July 3, rising 4%, as the decline proved temporary.
In the meantime, the company still has reason to be optimistic. Nvidia has years of dominance in the chip market, suggesting its role in AI isn’t likely to disappear anytime soon. The chipmaker also has new products in the pipeline that will likely continue to drive sales and profits to maintain its lead in the retail chip market.
Here’s why Nvidia stock could help you become a millionaire in the long run.
Nvidia has a long history of success in the chip market
Nvidia first made its name as a major player in the video gaming space. The company was one of the first to bring chips to the consumer market, with gamers using its GPUs to build high-powered gaming PCs. Nvidia’s success in the space has seen its desktop GPU market share grow from 65% in 2014 to 88% in the first quarter of 2024.
With its leadership in gaming chips, the company has positioned itself perfectly to play a dominant role in data center GPUs and, eventually, AI. In fact, according to IoT Analytics, Nvidia is responsible for over 90% of the data center GPU market. Many of these data centers have become critical to the growth of the AI market, powering platforms such as Amazon Web services, MicrosoftAzure and OpenAI’s ChatGPT.
Nvidia has managed to maintain its dominance in GPUs across various technology sectors despite the persistence of companies like Advanced microsystems And Intel. For example, while Nvidia has gained over 20 percentage points of desktop GPU market share over the past decade, AMD’s has fallen from 33% to 12%. Meanwhile, Intel briefly held a 4% share in Q1 2023, which has since fallen to 0%.
The best is yet to come
It’s only been a year since AI began to boom, and developers have barely scratched the surface of what’s possible with this generative technology. As the market matures, demand for chips can only continue to rise. In the meantime, Nvidia is using its lead to steer the industry in its favor and challenge its competitors.
In 2024, Nvidia adopted an annual release schedule for its new chips, while a two-year cycle was previously the market norm. This change forced AMD and Intel to follow suit. As a result, Nvidia is preparing to launch its Blackwell series chips, the company’s next generation of AI training processors. CEO Jensen Huang said during the announcement, “The Blackwell architecture platform will probably be the most successful product in our history and indeed in the entire history of computing.”
One of the main reasons for Nvidia’s success is the software platform that accompanies its AI chips, which it calls Compute Unified Device Architecture (CUDA). Developers around the world have become accustomed to this ecosystem, with a transition similar to that of a AppleThe iPhone might feel like it’s moving to a Samsung Therefore, Nvidia’s competitors will likely face an uphill battle to gain ground in AI.
Furthermore, the data in the table above shows the considerable financial lead that Nvidia has gained over its competitors. Since last July, Nvidia’s operating income and free cash flow have skyrocketed, much more than AMD’s or Intel’s, indicating that Nvidia is much more capable of continuing to invest in its business and maintain its market dominance.
Despite its recent growth, Nvidia’s price-to-earnings-to-growth (PEG) ratio is below one, indicating that its stock remains a safe bet. Coupled with its near-unmatched dominance in the nascent AI market, Nvidia is a must-buy in July and a stock that could make you a millionaire with the right investment.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long Intel January 2025 $45 calls, long Microsoft January 2026 $395 calls, short Intel August 2024 $35 calls, and short Microsoft January 2026 $405 calls. The Motley Fool has a disclosure policy.
Could Nvidia Stock Help You Become a Millionaire? was originally published by The Motley Fool
News Source : finance.yahoo.com
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