to say that Nvidia (NVDA 3.43%) A darling of the investment community, to say the least. The business has been a hit for investors, as the share price has increased an incredible 2,447% over the past five years, and most recently, an incredible 171% in 2024 alone.
this tops artificial intelligence As of this writing, (AI) stock is trading near all-time highs. Even after such an impressive performance, should you consider buying Nvidia now?
Demand is off the charts
Sold by Nvidia graphics processing unit (GPU) provides computing power for a variety of applications. More than 20 years ago, its primary function was to support PC gaming. But it’s GPUs, which allow AI models to be trained in large data centers, that have put the business on the map in recent years, and now account for the majority of the chipmaker’s sales.
The company-wide specific desire to develop, invest in, and offer a variety of AI-related services to its own customers directly benefits Nvidia. exclusive position in the AI chip market. The company can essentially be considered a top pick investment in the AI space.
Demand is off the charts. The recently launched Blackwell architecture has received significant interest from customers. “Demand for Blackwell has been incredible, and we are rapidly expanding our supply to meet the incredible demand our customers are placing on us,” said Colette M. Kress, Chief Financial Officer. He talked about the company’s financial results. 2025 Q3 Financial Results Announcement.
Revenue for the most recent fiscal quarter increased 94% year-over-year. And Wall Street analysts expect fourth-quarter sales to rise 72%. It’s also worth pointing out that this business is very profitable, with a return of an impressive 62%. Operating profit margin In the fourth quarter.
Nvidia risk factors
If you’re considering buying the stock, you can’t ignore the company’s fundamental momentum. But you need to check the valuation. The stock is price versus revenue Its price-to-earnings ratio (P/E) is 56.9, representing a 77% premium to tech companies. Nasdaq 100 index. The impressive growth and profitability of this business may be worthy of high praise, but it’s definitely still expensive. Investors also need to pay attention to downside factors.
Perhaps the most notable risk facing Nvidia comes from its own customer base, as its top four companies accounted for 53% of its accounts receivable as of October 27th. It is believed that this roster may include: meta platform, microsoft, Amazonand alphabet.
Everyone Develops unique AI chip Efforts to bring this costly endeavor in-house are a smart strategy given the billions of dollars companies are investing to enhance their AI capabilities. As these deep-pocketed tech giants increasingly vertically integrate their supply chains, the long-term result could be weaker demand for Nvidia.
We were also able to witness the collapse of the AI bubble. Investors always seem to overestimate what new technologies can do in the short term, driving up asset prices and prompting corporate executives to devote resources to avoid missing out on trends.
However, these AI models are very expensive to operate, users will still discover errors when interacting with them, and performance may become limited as the amount of unused data available worldwide dwindles. there is. Nevertheless, although AI is touted as a solution to many problems, it is far from certain.
tread carefully
It’s very hard to argue with Nvidia’s performance, having been at the forefront of the AI boom and rapidly rising to become one of the world’s most valuable companies. This has definitely made the company a winning choice among investors who have made a lot of money by owning the stock.
But it’s always difficult for me to recommend buying stock in a company when optimism, excitement, and greed are running high. Because these may be unsustainable. It’s also best not to ignore key risks such as valuations, customers moving upstream, and the potential for the AI bubble to burst.
All things considered, I don’t think Nvidia is a smart buy at this point.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Neil Patel has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
