With its stock up nearly 190% year to date and up nearly 2,830% in the past five years, investors may be wondering if Nvidia(NASDAQ: NVDA) is still a buy right now after these huge gains. The gains have powered it to become the second-largest company in the world by market cap.
Nvidia has clearly been riding the artificial intelligence (AI) wave, but here are four reasons the stock still looks like a buy today even after its strong performance.
1. AI's buildout is still in the early innings
The biggest bull case for Nvidia is that despite the insane demand the company has been seeing for its graphics processing units (GPUs) to help create AI infrastructure, it appears the AI buildout is still in the early innings of what is expected to be a long game. Major tech companies and well-funded AI start-ups, such as OpenAI and Elon Musk's xAI, have been pouring money into building AI-focused data centers to help train large language models (LLMs) and run AI inference.
This can be seen in the rising capital expenditure (capex) budgets of major tech companies and management's comments about future spending. For example, Alphabet and Meta Platforms have both indicated that the biggest risk with their AI spending is not overspending but underinvesting, while Oracle has said it sees no end in sight for AI infrastructure spending over the next five to 10 years.
Meanwhile, Microsoft's finance leases that have been contracted out but not commenced (by and large for AI data centers) have more than tripled in the past year to a whopping $108.4 billion.
AI models need exponentially more computing power to train as they advance and become more sophisticated. For example, Alphabet has said its Llama 4 LLM would need up to 10 times the computing power as its prior version, while xAI's Grok 3 used five times as many GPUs to train as Grok 2.
All of this points to the increasing need for GPUs, the area in which Nvidia has become the dominant leader.
Image source: Getty Images.
2. Nvidia is the market share leader
While the need for GPUs looks like it will continue unabated, Nvidia isn't the only company that can produce AI chips. Advanced Micro Devices also makes GPUs, while a few companies, such as Broadcom, help companies develop custom AI chips for their specific needs.
However, Nvidia has become the clear leader in the space with an over 80% market share. This comes not only from its strong chip offering but also the wide moat it has been able to create in the space through its CUDA software. Long before the AI frenzy, Nvidia created its CUDA platform to help developers program its GPUs using software that it gave away for free. As a result, CUDA became the standard program upon which developers in the industry learned to program these chips. As the de facto industry standard, it has made it more difficult for other companies to break into the space and take meaningful market share.
At the same time, Nvidia has recently sped up the development of its chips from a two-year iteration cycle to a one-year cycle. This should help keep it in the technological lead, as well as continue to give it pricing power, as it will consistently be able to offer new and improved designs. The company only just recently began shipping chips based on its Blackwell architecture, but it's already set to introduce new chips based on its Rubin architecture in 2026.
At this point, there doesn't appear to be any big threat to Nvidia losing any meaningful market share.
3. Nvidia has an attractive valuation
Despite Nvidia's huge stock price run over the last few years, the stock is still attractively valued given the opportunities in front of it. It trades at a forward price-to-earnings (P/E) ratio of about 35 based on 2025 analyst estimates, and a price/earnings-to-growth (PEG) ratio of just over 0.9. A PEG under 1 is generally viewed as undervalued, and growth stocks will often have PEGs well above 1.
NVDA PE Ratio (Forward 1y) data by YCharts
As such, Nvidia still has a huge AI opportunity ahead and a wide moat -- and it also trades at a very reasonable valuation.
4. The world's largest companies can still outperform
With a market cap of over $3 trillion, investors may be worried about how much bigger Nvidia can get. However, being one of the largest companies in the world does not mean its stock can still not outperform over the next decade.
For example, Apple was the largest company in the world around 10 years ago with a market cap of about $500 million at the start of 2014. A little over 10 years later it is still the largest company in the world, but with a market cap of over $3.5 trillion. That's a 7x increase in 10 years.
Another example is that Microsoft was the largest tech company at the start of 2010 with a market cap of just under $268.56 billion. Ten years later (in 2020) it was the second-largest tech company with a market cap of $1.2 trillion, a nearly 4.5x increase.
Nvidia's current huge size does not preclude its stock from going significantly higher in the years ahead, especially with the right tech trend pushing its growth.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
