Since the artificial intelligence (AI) arms race kicked off in 2023, Nvidia's (NVDA 5.93%) stock has risen nearly 1,400%. That's a huge run that has made it the world's largest company, leaving many investors worried that they missed out on one of the biggest winners of their lifetimes.
However, I don't think that's the case. While Nvidia isn't going to deliver another 1,000% run anytime soon (it likely won't at all), I'm still confident that it can deliver strong, market-crushing returns.
The market has tried to move on from Nvidia stock and is looking elsewhere for AI-related returns. This is premature, as Nvidia's outlook is still bright.
Image source: Getty Images.
Nvidia is still the king of AI compute
AI requires a ton of computing power to train and run. The vast majority of computing power has come from Nvidia since 2023, and that's unlikely to change due to the deep relationships Nvidia has formed and how workloads have been tailored to run on Nvidia's computing units. This keeps Nvidia in a solid position, but it also isn't resting there.
Later this year, Nvidia's new Rubin architecture rolls out, and it has several improvements over the already impressive Blackwell architecture. Rubin chips can run inference at a tenth of the cost and can train models at a fourth of the cost. Those are major benefits that deserve a premium over prior generations, which will help Nvidia sustain its impressive revenue growth.
NASDAQ: NVDA
Key Data Points
Additionally, the AI build-out is far from over. Nvidia estimates that by 2030, global data center capital expenditures will reach $3 trillion to $4 trillion annually. That may seem far-fetched, but Nvidia already projects the major AI hyperscalers will spend $1 trillion in 2027. Should both of those projections pan out and Nvidia maintain its market share, the returns on its stock could be phenomenal, and easily crush the market.
As a last point, Nvidia's stock is cheap compared to its peers. Other competitors in the AI computing world, like AMD and Broadcom, have captured the market's attention for what could happen with their offerings, while investors ignore what Nvidia is already doing. From a forward price-to-earnings (P/E) perspective, Nvidia trades at nearly half the level of Broadcom, and about a third the level of AMD.
NVDA PE Ratio (Forward) data by YCharts
Nvidia is reasonably valued and has a bright future ahead with new products rolling out. I think this makes Nvidia a solid stock pick over the next five years, and investors who missed out on its first run don't need to miss out on its second.
