For investors, Nvidia (NASDAQ:NVDA) has become the face of the AI trade, an emblem of how one company’s technology can define an entire investment theme. Over the past three years, its stock has surged more than 1,400%, a rally that has lifted its market value to around $5 trillion and underscored both the scale of its success and the intensity of expectations surrounding the next phase of AI growth.
Meet Your ETF AI Analyst
- Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions
- Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow.
Yet, some investors are beginning to wonder if Nvidia’s meteoric run may be nearing its limits. Concerns over an emerging AI bubble have surfaced, fueled by the rapid ascent of AI-related stocks and the sheer scale of overlapping investments among a handful of dominant players.
One of the latest examples is Nvidia’s $100 billion agreement with OpenAI, under which the ChatGPT creator plans to build and operate 10 gigawatts of data centers powered by Nvidia GPUs.
Still, top investor Keithen Drury, who is among the top 3% of stock pros covered by TipRanks, remains bullish. “Nvidia is well positioned to excel for years to come,” he says. “Its technology has powered most of the AI we experience today, and that’s unlikely to change much in the future.”
Drury outlines four key reasons behind his optimism. First, AI-related spending continues to surge, with hyperscalers driving massive capital investments that show no sign of slowing. While the investor acknowledges certain risks tied to OpenAI, he emphasizes that most AI infrastructure spending comes from deep-pocketed companies capable of sustaining aggressive capex cycles.
Drury also points to Nvidia’s forecast of up to $4 trillion in global data center expenditures by 2030, a figure informed by the company’s close visibility into the world’s largest infrastructure build-outs. “Investors should give Nvidia the benefit of the doubt for predicting what future demand will look like,” Drury adds.
Another tailwind lies in the inevitable GPU refresh cycle, as AI chips eventually require replacement. Given that hyperscalers are largely entrenched in Nvidia’s ecosystem, Drury believes switching to competitors would be costly and unlikely.
Drury is also hopeful that the ongoing U.S.-China discussions could yield benefits for Nvidia, which might be allowed to sell into this major market going forward. Lastly, despite NVDA’s stunning performance over the past few years, the investor posits that factoring in future earnings puts its valuation firmly among its technology peers.
In short, don’t rush to the exits just yet. “Nvidia still has plenty of room to run, and I think it’s still one of the best AI stocks investors can buy right now,” sums up Drury. (To watch Drury’s track record, click here)
Wall Street heartily agrees. With 37 Buys and just 1 Hold and 1 Sell, NVDA boasts a Strong Buy consensus rating. Its 12-month average price target of $237.35 implies an upside of 26%. (See NVDA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.