nvidia (NVDA) -4.05%)) It was one of the best performing stocks of the past few years. However, as artificial intelligence (AI) still looks early on, inventory should remain a winner in the long term.
Let’s take a look at three reasons why Nvidia is a must-see for long-term investors.
1. AI infrastructure spending is set to continue to grow
The biggest factor in Nvidia’s growth continues to come from AI infrastructure spending. The company’s graphics processing units (GPUs) tend to benefit greatly from increased AI infrastructure spending, as they are the backbone of AI training and inference.
Large US tech companies and AI startups needed exponentially more computing power, and therefore GPUs were needed to train AI models to make them more sophisticated. This is what you can see on the meta platform using 10x GPUs to train the Llama 4 model compared to the Llama 3 model and Elon Musk-supported Xai training You can do it. 200,000 GPUs to finish training on your Grok 3.
The Chinese Deepseek AI model, which claimed the company was trained for less than $6 million, raised some questions about future spending. Large tech cloud computing companies such as Amazon said that reducing AI costs per unit will lead to increased AI infrastructure spending. Meanwhile, experts have questioned the real cost of building a model for Deepseek, with independent semiconductor research firm Semianalysis estimates it is actually close to $1.3 billion.
At the same time, Big 3 cloud computing companies have been significantly increasing their spending on AI infrastructure this year. The Amazon, Microsoft and Alphabet combination plans to spend more than $250 billion in Growth Capital Expenditure (CAPEX) in 2025. Meanwhile, Metaplatform says it is considering increasing its growth CAPEX from $60 billion to $65 billion from $39 billion in 2024. Additionally, a consortium of companies backed by Japan’s SoftBank has pledged to spend $500 billion on AI infrastructure. In the US for the next few years as part of Project Stargate.
Currently, AI infrastructure spending is only on the rise, and Nvidia is poised to become the biggest winner.
Image source: Getty Images.
2. Dominant market position
Nvidia is the winner of AI as it has a market share of around 90% due to its dominant market position in GPUs. This domination comes from the wide moat created by the company through the CUDA software platform. GPUs are originally named because they were designed to help speed up graphics rendering in video games.
However, NVIDIA developed the CUDA software platform around 2006, allowing developers to program chips for other tasks. So the developers learned to program GPUs using CUDA, making it a standard platform for programming GPUs for tasks other than video games. Over the years, Nvidia has expanded its software lead through Cuda X, a set of microservices, libraries, tools and technologies built on top of CUDA.
Semian Alicis tested the GPU against advanced microdevice when it highlighted the Nvidia wide mote at the end of 2024. (AMD) -2.92%)) MI300X GPU. It said it requires multiple AMD engineers to fix the software bug it encountered, and that chips are not out of the box for AI training. Meanwhile, it is called Nvidia’s ready-to-use experience “Amazing.”
However, Nvidia doesn’t sit still. The company has increased its development cycle to once a year, continuing to drive innovation and improve its software. This keeps businesses steady in pricing.
3. Cheap rating
Despite Nvidia’s strong performance over the past few years, its inventory is still priced attractively. It trades at a positive price (P/E) ratio of 25 times the analyst estimate for 2025 and a price/revenue (PEG) ratio of 0.5. Pegs below 1 usually indicate an undervalued inventory, but growing stocks often go well above 1.
NVDA PE ratio (forward 1Y) data by YCHARTS. PE ratio = price and return rate. PEG ratio = Price/Revenue and Growth Rate.
Meanwhile, Nvidia is a growth machine, and the company has more than doubled its revenue for the second consecutive year in fiscal year 2025 (ends in January). Analysts are currently sought to increase revenues by more than 50% in fiscal year 2026 and an additional 20% in fiscal year 2027.
Overall, Nvidia has had a big opportunity before that, but the stock remains attractive. It makes it a buy for long-term investors.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development, Facebook spokeswoman and sister to Metaplatform CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. Geoffrey Seiler has a position in Alphabet. Motley Fool has positions and recommendations from Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. Motley Fool recommends the following options: A $395 phone at Microsoft for January 2026 length and a $405 phone to Microsoft for January 2026 short term. Motley Fools have a disclosure policy.
