Artificial intelligence (AI) has probably been the hottest investment theme on the planet over the past year. Companies involved in this high-growth area have seen their share prices climb in the triple digits and have fueled gains in the three major benchmarks -- the S&P 500, the Dow Jones Industrial Average, and the Nasdaq.
Investors have piled into AI stocks because of the technology's potential to streamline processes and develop game-changing new products and services. Today's $200 billion AI market is forecast to reach more than $1 trillion by the end of the decade, offering significant growth opportunities for companies involved -- and investors who get in on these growth stories early.
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And one particular growth story that's attracted a lot of attention is Nvidia (NASDAQ: NVDA), a stock that's soared 1,900% over the past five years. The company has gone from primarily serving the video gaming market with its chips to dominating the AI chip market -- and revenue has exploded higher, climbing in the double or triple digits quarter after quarter. But is Nvidia really the greatest AI stock around? Let's find out.
Image source: Getty Images.
How AI is transforming businesses
So, first, let's talk a bit about AI in general. The technology, by leveraging the power of large language models (LLMs), is helping companies, researchers, and even you and me in our daily lives on a variety of tasks. Some of these uses are more important than others, and certain can be game-changing. For example, AI is streamlining processes for companies, identifying risks to their businesses, and powering the development of new life-saving drugs and medical devices.
Many types of companies could generate earnings growth thanks to AI: those designing the tools for the development of LLMs and AI platforms, cloud providers offering customers access to these tools, companies including AI in the products and services they sell to others, and companies applying AI to their businesses to gain in efficiency and reach new accomplishments. That's a lot of potential AI winners.
Now, let's move on to consider Nvidia's position in the AI market. The company is the dominant player in AI chips thanks to the quality of its graphics processing units (GPUs). These chips are the fastest around, powering key tasks like the training and inferencing of models. Inferencing is a particularly important function because it involves the reasoning the model goes through to answer complex questions -- and here, it's key to use many high-powered GPUs. So, this represents a growth area for Nvidia.
Nvidia's ecosystem of AI
But Nvidia isn't only about chips. The company has built an entire ecosystem of AI products and services, including enterprise software -- and this is allowing Nvidia to remain involved in every stage of a customer's AI development and serve every type of customer.
You can go to Nvidia for GPUs and networking options, for example, or you can sign on for enterprise software to streamline the deployment of an entire AI platform. Nvidia even is set to play a big role in the next wave of AI growth: agentic AI, or AI-driven software that can reason and solve problems. The company and its partners have designed AI blueprints to help customers design their own AI agents to be used through the Nvidia Enterprise system.
Potential headwinds?
Some investors have worried about rivals challenging Nvidia's dominance, but the company's leadership position today and commitment to innovation will make it difficult for another player to unseat it. Another concern, which arose recently when DeepSeek said it trained a model for less than $6 million, was that Nvidia customers may follow that route -- and cut their training budgets.
I don't see that happening. First, experts already are saying DeepSeek's figures aren't accurate -- and the Chinese start-up actually spent a lot more than it announced to train its model. And second, if indeed it is possible to train a model for a very low price, more and more companies would launch AI programs -- offering Nvidia the opportunity to gain on volume. Finally, it's important to remember that Nvidia GPUs could see significant growth as inferencing takes off.
So, let's get back to our question: Is Nvidia really the greatest AI stock? There are many very strong AI players out there that make wonderful investments. But, if you're looking for just one AI stock to buy right now, Nvidia is the name to snap up. I consider this company the ultimate AI stock because it benefits from every stage of AI development -- from the infrastructure buildout to the actual application of AI to real world situations. Across those stages, customers will flock to Nvidia, and that should result in fantastic earnings growth -- and share price performance -- over the long run.
Should you invest $1,000 in Nvidia right now?
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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 the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
