Nvidia‘s stock has reached stratospheric heights, leaving the S&P 500 in its wake with a staggering 145% surge year to date. This otherworldly performance isn’t just a flash in the pan – Nvidia’s shares have soared 487% over the last three years and an astonishing 2,740% over the past five.
But don’t let these astronomical numbers deter you. Nvidia’s long-term valuation remains attractive, trading at 28.5 times projected earnings for fiscal 2027. Investors, however, are questioning whether this remarkable run can be sustained. Here are three solid reasons why Nvidia’s shares still beckon as a top-notch investment.
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Why Nvidia Stands Out #1: Shareholder Gratitude with Buybacks and Dividends
Nvidia has made it clear – they love their shareholders. The company repurchased 62.8 million shares for a cool $7 billion in the second quarter of fiscal 2025 alone, a sign of their commitment to rewarding investors. Recently, Nvidia’s board gave the green light for a whopping $50 billion in share repurchases, adding to a total of $53.9 billion as of Aug. 26. This mammoth buyback dedication underscores their unwavering faith in Nvidia’s future.
While the dividend may seem like peanuts with a yield of 0.03%, Nvidia upped its quarterly cash dividend to $0.01 per share post-stock-split earlier this year. It’s the little things that count, right? This increment, however small, underscores Nvidia’s devotion to its loyal shareholders.
These capital gestures from Nvidia shine a spotlight on their commitment to making shareholders feel valued. Combining aggressive share buybacks with consistent dividend growth gives investors multiple paths to returns, setting Nvidia apart in a tech landscape where many companies shun dividends to reinvest in their ventures.
Why Nvidia Stands Out #2: Riding the Wave of AI
Nvidia is perched perfectly to ride the artificial intelligence (AI) tsunami. Their graphics processing units (GPUs) are the go-to for AI and machine learning applications, a market in which Nvidia dominates. This prowess reflects in their data center revenue, which is shooting sky-high.
Predictions from industry experts paint a vivid picture. AI is set to revolutionize the global economy, with Accenture forecasting a potential doubling of annual global economic growth rates by 2035 thanks to AI. PricewaterhouseCoopers even puts a value of up to $15.7 trillion on the increase in global GDP by 2030 due to AI adoption.
Nvidia’s tech marvels in AI hardware place them at the vanguard of this revolution. Their GPUs are the backbone for training extensive language models and powering AI applications across various sectors. With AI gaining ground rapidly, Nvidia is in a prime position to benefit from the heightened demand for their specialized hardware.
Why Nvidia Stands Out #3: The Expanding Data Center Domain
Nvidia’s CEO Jensen Huang paints a fascinating future vision – where “millions of GPU data centers” fuel AI interactions globally. This vision is fast becoming a reality. Big tech players are ramping up their GPU acquisitions, with Microsoft eyeing a three-fold increase in GPU supply to 1.8 million units this year.
Others aren’t far behind. Meta Platforms ordered 150,000 H100 GPUs in the past year and plans 350,000 H100s or equivalents this year. Even Elon Musk’s Tesla and X are diving deep into AI infrastructure, stoking the flames of demand further.
Analysts predict even more eye-popping growth. Broadcom envisions million-GPU clusters by 2027, compared to clusters with tens of thousands of GPUs today. AMD’s Lisa Su forecasts the AI accelerator market to hit $400 billion by 2027. With Nvidia’s tight grip on the market, this could translate to a data center segment worth $320 billion for the company by 2027. To put this in context, Nvidia is set to pull in around $106 billion to $121 billion in data center revenue in fiscal 2025 (an approximation).
The Journey Forward
Nvidia’s stock has charted an extraordinary trajectory. Their unwavering dedication to shareholders through buybacks and dividends underscores a robust belief in their future. Crucially, Nvidia’s pivotal role in the AI realm sets them up for continued growth.
While past glories aren’t firm indicators of future feats, Nvidia’s tech dominance and strategic positioning make them a tantalizing proposition for investors eyeing the AI tidal wave. As AI finds deeper roots in diverse fields, Nvidia’s hardware stands poised to be the bedrock powering these advancements. Their financial solidity and focused strategy offer a firm ground for future expansion.
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