Why Nvidia Is the Top Stock Pick Right Now

There are many compelling reasons to consider buying Nvidia, a key player in the technology sector, with only one notable drawback.

In recent years, stock splits have regained popularity among investors. This strategy was common in the 1990s but fell out of favor until a new generation of investors recognized its benefits. Companies tend to split their shares after experiencing strong growth and impressive financial performance, which results in soaring stock prices.

Several companies have executed stock splits this year, illustrating this trend:

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

All these companies share a history of exceptional returns over the years.

If I could only invest in one stock at this moment, I would choose Nvidia. Here’s why.

The Visionary Leadership of Nvidia

Many investors, myself included, attribute part of Nvidia's appeal to its significant potential in the field of artificial intelligence (AI). This is indeed a major reason to own Nvidia stock, but one of the most fascinating aspects of the company is CEO Jensen Huang’s remarkable ability to foresee future trends and design solutions accordingly.

Nvidia was the pioneer of the graphics processing unit (GPU) that transformed gaming starting in 1999. However, the company didn't stop there; by 2006, they had adapted GPU technology to enhance supercomputing performance. Today, GPUs are essential for cloud computing and data centers, with Nvidia commanding a remarkable 98% share of the data center GPU market last year, according to TechInsights.

Importantly, Huang also anticipated the AI explosion. In 2013, he positioned Nvidia to capitalize on this emerging technology, which allowed the company to thrive once AI became mainstream last year.

Strong Financial Performance

Nvidia’s financial results tell a compelling story. For the second quarter of the fiscal year 2025 (ending July 28), Nvidia reported record revenue of $30 billion, marking a 122% increase year over year and a 15% rise from the previous quarter. This record was driven by an astonishing $26.3 billion in data center revenue, which increased by 154%. Furthermore, profits surged, evidenced by diluted earnings per share (EPS) reaching $0.67, representing a 168% rise.

Management expects this growth trajectory to continue, though at a slightly slower rate. Nvidia forecasts a revenue target of $32.5 billion, suggesting a year-over-year growth of 79%, paired with increased profitability. Although this is less than the triple-digit growth they experienced over the last five quarters, it still reflects remarkable progress.

Why Invest Now?

You may wonder if Nvidia’s stock has already peaked after an impressive rise of 837% since the start of last year, achieving record highs just recently. However, it’s essential to recognize that we are still in the early stages of the AI revolution, and many new applications are developing. While some early attempts at AI may not have succeeded, significant advancements are forthcoming, making it reasonable to believe that the best opportunities for growth may still lie ahead.

Projections about the generative AI market vary, but it could be worth $1.3 trillion by 2032, according to Bloomberg Intelligence. More bullish figures from Ark Invest suggest that the AI software market alone could lead to an additional $13 trillion in spending by the decade’s end, with an even more optimistic scenario valuing it at $37 trillion. The true magnitude of generative AI is still uncertain, but the projections continue to increase.

Critics may argue that Nvidia's stock is excessively priced, currently trading at 64 times earnings and 35 times sales, which seems high. However, it's worth mentioning that analysts expect Nvidia to generate EPS of $4.05 in fiscal year 2026, which starts in January. Based on current stock prices, this amounts to about 33 times forward earnings—similar to the S&P 500’s multiple of 30. Analysts also predict Nvidia’s profits will grow by 52% annually over the next five years, supporting the argument for its premium valuation.

In conclusion, it’s evident that Nvidia’s growth story is far from finished, with the addressable AI market expanding continually, and the stock may not be as overpriced as it seems. Additionally, I trust Huang to continue predicting upcoming trends and adapting Nvidia’s technologies for maximum profitability.

Considering all of this, if I could purchase only one stock right now, it would undoubtedly be Nvidia.

Nvidia, Stock, Investment