Nvidia (NASDAQ: NVDA) has been one of the best-performing stocks over the past few years. However, with artificial intelligence (AI) still looking like it is in its early days, the stock looks like it should continue to be a winner over the long term.
Let’s look at three reasons Nvidia is a must-buy for long-term investors.
The biggest driver of Nvidia’s growth will continue to come from AI infrastructure spending. The company’s graphics processing units (GPUs) have become the backbone of AI training and inference and, as such, tend to greatly benefit from increased AI infrastructure spending.
Major tech companies and AI start-ups in the U.S. have needed exponentially more computing power and, thus, GPUs to train their AI models to make them more advanced. This can be seen in Meta Platforms using 10 times the GPUs to train its Llama 4 model compared to its Llama 3 model and Elon Musk-backed xAI training its latest AI model by ramping up the GPUs from 20,000 GPUs used to train Grok 2 to eventually 200,000 GPUs to finish Grok 3’s training.
China’s DeepSeek AI model, which the company claimed was trained for less than $6 million, has raised some questions about future spending. Leading tech cloud computing companies such as Amazon stated that lower per-unit AI costs would lead to increased AI infrastructure spending. Meanwhile, experts have questioned the true costs of building DeepSeek’s model, with independent semiconductor research company SemiAnalysis estimating it really cost closer to $1.3 billion to develop.
At the same time, the big three cloud computing companies are greatly ramping up AI infrastructure spending this year. Combined, Amazon, Microsoft, and Alphabet plan to spend more than $250 billion in growth capital expenditure (capex) in 2025, mostly on AI infrastructure. Meanwhile, Meta Platforms has said it is looking to boost its growth capex to between $60 billion and $65 billion, up from $39 billion in 2024. In addition, a consortium of companies backed by Japan’s SoftBank pledged to spend $500 billion on AI infrastructure in the next few years in the U.S. as part of Project Stargate.
Right now, AI infrastructure spending is only increasing, and Nvidia looks poised to be the biggest winner.
Nvidia is a big AI winner because of its dominant market position in GPUs, with an approximate 90% market share. This dominance stems from the wide moat the company has created through its CUDA software platform. GPUs were originally designed to help speed up graphics rendering in video games, hence their name.
