Over the last year, a quantum-computing-themed fund called the Defiance Quantum ETF has rocketed by 41%. Among some of the biggest contributors to these gains are popular quantum computing stocks such as IonQ, whose shares have soared by 394% over the last year -- as well as Rigetti Computing and D-Wave Quantum, both of which have witnessed share price gains in excess of 1,000%.
With such robust returns, these three red-hot quantum computing stocks might seem like no-brainers. Nevertheless, I have another company on my radar that I think will outperform these stocks in the long run.
Let's explore how Nvidia (NVDA 0.33%) is starting to emerge as an interesting opportunity in the quantum computing landscape. More importantly, I'll detail why the company is my top pick in the space and assess if the stock is a good buy right now.
NASDAQ: NVDA
Key Data Points
Nvidia is going for much more than chips
Nvidia reports its revenue into five major buckets: data center, gaming, professional visualization, automotive, and other. Today, nearly 90% of the company's revenue stems from the data center segment.
This makes sense, as cloud hyperscalers such as Microsoft, Alphabet, and Amazon, as well as other major AI developers, including Meta Platforms and Oracle, have been on a relentless buying spree for Nvidia's chips over the last couple of years as they continue investing in data center infrastructure.
What investors may not realize, however, is that Nvidia isn't just a hardware company. It also has a thriving software unit that integrates tightly with the GPU business.
The company's CUDA programming platform complements the chip business -- essentially creating an ecosystem of AI-powered software and hardware. This tight integration provides Nvidia with a competitive advantage over the competition, making it challenging for customers to switch to alternative platforms. This savvy business model has put Nvidia ahead of the pack when it comes to being the vendor of choice for generative AI development.
Nvidia is already parlaying the CUDA application to quantum computing, aptly naming the program CUDA-Q. Let's explore why Nvidia's pursuit of quantum computing could be a lucrative move for the company.
Image source: Getty Images.
How could quantum computing help Nvidia?
While Nvidia maintains a sizable lead over its competition in the chip landscape, I am concerned that semiconductors are becoming increasingly commoditized.
Many of Nvidia's own customers are investing in custom silicon solutions. Meanwhile, Advanced Micro Devices continues to show impressive innovation with its own GPU architectures.
I see the rise of quantum computing as an opportunity for Nvidia to diversify its business beyond AI data centers. Moreover, I think continuing to offer additional software applications through CUDA should help Nvidia maintain a healthy profit margin profile -- especially as the chip landscape begins to experience more competitive forces.
Is Nvidia stock a buy right now?
As I write this (June 16), Nvidia is trading at a forward price-to-earnings (P/E) ratio of 33.7. This isn't exactly dirt cheap. For reference, the average forward P/E across the S&P 500 is around 22. What I am more focused on are the broader trends across Nvidia's valuation.
NVDA PE Ratio (Forward) data by YCharts
Per the chart above, Nvidia's forward P/E multiple experienced notable contraction throughout most of this year. While Nvidia recovered from the initial decline back in January following the DeepSeek saga, the stock took another, more prolonged hit around April -- during the time of the President's initial tariff announcements.
As investors can see, though, Nvidia has been experiencing some valuation expansion over the last month or so following a solid first-quarter earnings report, in combination with some net positives on the tariff negotiation front.
Yet even with the recent buying, Nvidia remains a much cheaper stock today than it was a year ago based on forward P/E trends. While there is some momentum fueling the share price right now, I would still encourage investors to consider scooping up shares.
Overall, Nvidia stock looks reasonably valued. Furthermore, with yet another multibillion-dollar market in the form of quantum computing representing an opportunity for the company to maintain its lead over the competition, the long-run narrative around Nvidia remains compelling.
