Is Nvidia Still the Ultimate AI Stock to Buy in 2024?

Nvidia is an AI stock that can help you outpace the broader markets despite its lofty valuation and outsized returns.

| More on:
Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies

Source: Getty Images

Shares of Nvidia (NASDAQ:NVDA) have been on an absolute tear in the last decade. After falling over 50% during the bear market of 2022, NVDA stock has surged more than 500% since the start of 2023. Valued at a market cap of US$2.24 billion, Nvidia is now among the largest companies in the world and has returned a staggering 20,000% to shareholders since May 2014.

As past returns don’t matter much to current investors, lets see if Nvidia stock should still be part of your equity portfolio right now.

Nvidia is part of a rapidly expanding addressable market

Artificial intelligence, or AI, is a megatrend that is here to stay and is potentially the biggest tech advancement the world might ever see. Nvidia is positioned to benefit from AI as the chip manufacturer’s graphics processing units, or GPUs, are used to power a wide range of AI applications in data centres.

Compared to peers, Nvidia’s GPU chips are energy efficient and can process calculations faster, making them ideal for training data-heavy AI models. In fact, Nvidia’s GPU share in the AI chip market is forecast between 80% and 90%, making it an enticing investment even in 2024.

Advanced Micro Devices chief executive officer Lisa Su expects the AI chip market to surpass US$400 billion by 2027. In 2023, Nvidia’s data centre business generated US$47.5 billion in sales. So, if Nvidia can maintain a 40% market share in this business, data centre sales might reach US$160 billion by 2027.

Nvidia’s sales increased from US$16.67 billion in fiscal 2021 (which ended in January) to US$60.9 billion in fiscal 2024. It is forecast to report revenue of US$112 billion in 2025 and US$140.36 billion in 2025. Moreover, adjusted earnings are forecast to expand from US$12.96 per share in fiscal 2024 to US$65 per share in fiscal 2029.

So, if NVDA stock is priced at 30 times forward earnings, it may trade at US$1,950 per share in May 2028, indicating an upside potential of over 100%.

Diversify your AI portfolio

While Nvidia remains a compelling investment in 2024, investors can consider diversifying their AI portfolio by purchasing shares of companies such as UiPath (NYSE:PATH). Valued at US$11 billion by market cap, PATH stock is down 77% from all-time highs, allowing you to buy the dip.

UiPath is an enterprise-facing software platform that automates business processes. It serves sectors such as healthcare, telecom, finance, and banking and provides automation services for processes such as accounts payable, claims processing, contact service, and accounting.

In the fiscal fourth quarter (Q4) of 2024 (which ended in January), UiPath reported annual recurring revenue of US$1.46 billion, up 22% year over year. A steady stream of recurring sales should allow UiPath to generate cash flows across business cycles.

Unlike other growth stocks in the AI space, UiPath is reporting consistent profits, ending Q4 with an operating margin of 4%. Analysts tracking UiPath expect it to end fiscal 2029 with adjusted earnings of US$3.6 per share. If the tech stock is priced at 30 times forward earnings, it should trade at US$108, indicating an upside potential of over 450% from current prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Advanced Micro Devices, Nvidia, and UiPath. The Motley Fool has a disclosure policy.

More on Tech Stocks

question marks written reminders tickets
Tech Stocks

Nvidia’s Historic Stock Split: Will Investors See Bigger Gains?

Nvidia's (NASDAQ:NVDA) record 10:1 stock split entices many investors in several important ways. But some myths aren't technically correct.

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

Want $1 Million in Retirement? 3 Stocks to Buy Now and Hold for Decades

Growth stocks such as Docebo and Celsius Holdings should help you generate outsized gains in the upcoming decade.

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

A TSX growth stock is a top pick and profitable investment choice if you missed out on the ascent of…

Read more »

grow dividends
Tech Stocks

3 Tech Stocks That Could Make You a Millionaire

Given their long-term growth potential, these three tech stocks could deliver oversized returns in the long run.

Read more »

Businessman holding AI cloud
Tech Stocks

Ready to Invest in Artificial Intelligence (AI)? 2 Stocks That Are Solid Bets

These two AI stocks provide investors with strong future opportunities as AI continues to become a part of our everyday…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Down 88% from all-time highs, is Lightspeed stock a good buy in May 2024 and can the TSX tech stock…

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

Forget NVIDIA: 1 Tech Stock to Buy Instead

Here’s why Shopify (TSX:SHOP) stock could be a smart long-term buy for investors willing to look beyond NVIDIA’s impressive growth.

Read more »

Lights glow in a cityscape at night.
Tech Stocks

2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade

Qualcomm (NASDAQ:QCOM) and another well-placed AI stock could drive substantial capital gains over the next decade. Here's how.

Read more »