Why Nvidia is the Top Stock to Buy Right Now

There are many compelling reasons to consider investing in Nvidia, a key player in technology. However, there is one reason that may make some investors hesitant.

In recent years, stock splits have become increasingly popular among investors. Once a common practice during the 1990s, stock splits fell out of favor for a while. Now, they are being rediscovered by a new generation of investors. Companies often decide to split their shares after experiencing sustained growth and impressive financial performance, which usually results in rising share prices.

For instance, this year has seen several prominent companies announcing stock splits:

• Nvidia (NVDA) executed a 10-for-1 split effective June 7, 2024.
• Chipotle announced a 50-for-1 split effective June 25, 2024.
• Broadcom completed a 10-for-1 split effective July 12, 2024.
• Super Micro Computer executed a 10-for-1 split effective September 30, 2024.

Each of these companies shares a history of delivering market-beating returns over the years.

If I had to choose just one stock to buy right now, it would undoubtedly be Nvidia. Here’s why.

A Visionary Leader

Many investors, including myself, consider the significant opportunity presented by artificial intelligence (AI) as the main reason to invest in Nvidia. This is an important factor, but what truly stands out about the company is CEO Jensen Huang's remarkable ability to foresee and respond to emerging trends.

Nvidia first introduced the graphics processing unit (GPU), which transformed gaming, back in 1999. However, even then, the company was already thinking ahead. By 2006, they had adapted their technology for supercomputing applications. Now, GPUs have become essential for cloud computing and data centers, with Nvidia commanding a striking 98% of the data-center GPU market last year, based on data from TechInsights.

Moreover, Huang recognized the potential impact of AI as early as 2013, positioning Nvidia to benefit from advancements that were still a decade away. As AI gained traction last year, Nvidia reaped the rewards of its foresight.

Impressive Financial Performance

As the saying goes, “A picture paints a thousand words,” and in this case, Nvidia’s financial results speak volumes. For the second quarter of fiscal 2025 (ended July 28), Nvidia reported record revenue of $30 billion, reflecting a staggering 122% increase year-over-year and a 15% increase compared to the previous quarter. This impressive growth was driven by record data-center revenue of $26.3 billion, which rose by 154%. Earnings also saw a major boost, with diluted earnings per share (EPS) of $0.67, marking a 168% increase.

Management predicts continued growth, albeit at a slower rate. Nvidia's revenue forecast for the upcoming quarter is $32.5 billion, which would signify a 79% year-over-year increase, alongside a corresponding rise in profitability. While this growth rate is lower than the impressive triple-digit increases observed over the previous five quarters, it remains an excellent achievement.

Why Invest Now?

Some may argue that, given Nvidia's rapid growth, the best opportunities may have already passed. Since the beginning of last year, the stock has surged an impressive 837%, reaching new record highs just recently.

However, we are still at the beginning stages of AI development, with countless new applications on the horizon. Critics might point to early missteps as evidence that the technology is not yet fully viable. While this is partly true, it won’t be long before these initial challenges are resolved, allowing AI to reach its potential. Therefore, I believe the most significant AI-related gains may still be ahead.

Numerous estimates exist regarding the size of the generative AI market, and there is no consensus. According to Bloomberg Intelligence, it could be valued at $1.3 trillion by 2032. A more optimistic projection comes from Cathie Wood’s Big Ideas 2024 report from Ark Invest, suggesting that the AI software market alone could drive an additional $13 trillion in spending by the end of the decade, with a bull case as high as $37 trillion. The truth is, the future size of the generative AI market remains unknown but is likely to continue expanding.

Some critics may argue that Nvidia is overvalued and “priced to perfection,” which is a fair point. Currently, Nvidia’s stock is trading at 64 times its earnings and 35 times sales—figures that could be considered excessive in many contexts. However, analysts’ consensus estimates, which have proven to be conservative in the past year, suggest Nvidia could deliver EPS of $4.05 for the upcoming fiscal 2026, starting in January. At its latest closing price, this equates to about 33 times forward earnings, not much higher than the S&P 500’s average of 30. Moreover, Wall Street anticipates Nvidia’s profits to grow by 52% annually over the next five years, highlighting the stock’s willingness to command a premium valuation.

Overall, this paints a picture of continued growth for Nvidia, with an expanding addressable market for AI, and the stock's valuation may be less daunting than it appears at first glance.

Additionally, I have confidence in Huang's ability to identify the next major trend and adapt Nvidia’s technology to address emerging needs, leading to significant profits.

Given all this, Nvidia is my top stock pick for those looking to invest right now.

Nvidia, Investment, AI