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.
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.
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.
