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This Artificial Intelligence (AI) Stock Is a "Magnificent Seven" Leader. But Is It a Buy?

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There's no two ways about it. Nvidia (NASDAQ: NVDA) has been the proverbial talk of the town since 2023, shortly after OpenAI launched ChatGPT to start what would turn into a heated race for dominance of the artificial intelligence (AI) market.

While Nvidia had been using its graphics processing technology for AI purposes well before that, this was a clear growth catalyst. Now more than 80% of Nvidia's revenue is in its AI data center business, making that division nearly 10 times as big as it was just three years ago.

The stock has responded accordingly, of course. Not only has it earned a spot as one of the  "Magnificent Seven" tickers, but it's outperformed all six other stocks in each of the past two years to become the planet's second-biggest company, as highlighted by The Motley Fool's own research arm.

But as the old adage goes, past performance is no guarantee of future results. Is Nvidia ready to repeat the feat, and then repeat it again and again for the foreseeable future? Keep reading.

The AI market that Nvidia dominates is changing quickly

There's little doubt that the artificial intelligence revolution is still in its early stages. Mordor Intelligence predicts that the AI hardware market alone is set to grow at an average annualized pace of 26% through 2030. Given Nvidia's dominance of the AI accelerator industry, this rising tide bodes well for the company as well as its shareholders.

And all things considered, Nvidia stock's forward-looking price-to-earnings ratio of 26 isn't an unreasonable premium to pay for an equity of this sort. This year's top line is expected to soar more than 50%, after all, pulling per-share profits up the same amount with it.

But, there's some thing else to consider.

It's not always easy to see, but most veteran investors can -- and will -- attest to the fact that things change in ways that only become obvious after the fact. The problem is, by then it doesn't matter.

The brewing change that should concern anyone interested in stepping into a stake in Nvidia at this time is the way the artificial intelligence hardware industry is evolving. While Nvidia is still the king of the industry, changes are surfacing. For instance, other compute-processing architecture designed by chip-design company Arm Holdings (NASDAQ: ARM) is not only proving more efficient for power-hungry applications like AI, but is proving more functional in terms of how artificial intelligence platforms increasingly operate.

Specifically, while Nvidia's core technology can successfully power both inference-based and training-based AI, as artificial intelligence tech becomes better developed and more specialized, Arm's inference-processing tech is emerging as a favored approach. Many industry experts consider inference to be the future of AI.