The company’s chips account for 90% of the AI market, and demand is unlikely to disappear anytime soon.
NVIDIA (NVDA -1.78%) The company has seen historic growth over the past decade, with its stock price up more than 25,000% since 2014. The company has taken the semiconductor market by storm and almost singlehandedly shaped the consumer semiconductor industry into what it is today.
Nvidia was one of the first companies to start selling graphics processing units (GPUs) directly to customers who use these chips to build high-performance PCs for activities such as gaming and video editing.
The company’s direct-to-consumer business remains highly profitable, with its gaming division growing 18% year-over-year in the first quarter of fiscal 2025. Its success in desktop GPUs has given the company the brand and financial clout to expand into several other sectors, including artificial intelligence (AI), cloud computing, healthcare, government, robotics, and self-driving cars.
Nvidia shares have risen about 140% over the past 12 months, but it looks like they’re just getting started, so despite the recent growth, Nvidia stock remains an attractive choice worth considering this year.
Potential to hit market cap of over $3 trillion
Earlier this year, NVIDIA briefly surpassed $3 trillion in market cap, joining the elite club of $1 trillion companies alongside Microsoft and Apple. However, after some corrections and pullbacks from tech industry investors, the company’s market cap is now around $2.7 billion. However, given NVIDIA’s huge growth potential, it may not be long before the company crosses the $3 trillion milestone again — and this time for good.
By giving developers the power they need to build generative software, AI has highlighted the important role chips will play in the future of technology. Meanwhile, AI is just one of many industries that need high-performance chips to move forward, and it’s been a catalyst for a lot of growth for Nvidia.
According to data from JPMorgan Chase, tech giants Microsoft, Amazon, Alphabet and Meta Platforms are expected to spend a combined $201 billion on capital expenditures by May 2025, up 44% from roughly $140 billion in 2023. Much of that will be spent expanding their AI positions, building out data centers and outfitting them with GPUs.
Meanwhile, NVIDIA is well positioned to benefit greatly from rising AI spending, with GPUs accounting for roughly 90% of the market. The company posted 262% year-over-year revenue growth in Q1 2025, up 18% from the previous quarter. The increase was primarily driven by a 427% increase in its data center division, signaling increased AI chip sales.
Nvidia has seen impressive growth with AI, even as many markets have only just scratched the surface of the technology’s potential. Large-scale language models like OpenAI’s ChatGPT have proven the usefulness of language generation. But as Meta’s chief scientist Yann LeCun recently pointed out, these platforms “don’t really understand the physical world. They don’t have persistent memory. They can’t reason, and they certainly can’t plan.”
The best and most efficient uses of AI have likely yet to be thought of and will take decades to understand, and Nvidia is well-equipped to continue to drive market developments. Increased spending on AI will likely continue to boost revenues and drive its market cap to more than $3 trillion.
Nvidia isn’t trading at a cheap price, but its stock is worth more than you think
Nvidia shares recently traded at about 65 times earnings, higher than its biggest rival, Advanced Micro Devices, which trades at a staggering P/E ratio of 206. While the data shows Nvidia is worth more than its rivals, it’s still not a bargain.
Data by YCharts.
However, this chart shows that Nvidia’s current P/E is below the five-year average for this metric. During that time, the company’s shares have surged 2,450%. As a result, a high P/E doesn’t necessarily mean the company’s stock isn’t headed for growth.
Nvidia’s huge potential in AI and technology in general makes its stock too attractive to ignore for anyone looking to invest for the long term: the company will likely continue to profit from rising demand for chips for years to come, as more and more markets require powerful hardware for development.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, former director of market development and communications at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, JPMorgan Chase, Meta Platforms, Microsoft, and NVIDIA. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
