Key Points
Nvidia (NASDAQ: NVDA) may be the biggest no-brainer buy on the market right now. It’s a screaming bargain, and it’s just begging to be bought with its combined rapid growth rate and cheap stock price. The market rarely offers deals on stocks as impressive as Nvidia, and the only reason why the stock isn’t higher right now is its sheer size. As the world’s largest company, some investors have a hard time imagining it getting far bigger, but that’s exactly what Nvidia is slated to do over the next year, and I think it’s prudent to get in now, which is why I’m buying shares.
There are few better stocks to buy than Nvidia, and now is the perfect time to buy.
Nvidia’s growth rate isn’t slowing down
Nvidia is the primary computing unit supplier of the AI arms race. Its GPUs are the industry standard, and any company that launches a competing product knows they will be compared to Nvidia’s GPUs as a baseline. Because Nvidia’s GPUs are widely used, it gives it a great pulse on the health of the AI build-out. Many AI hyperscalers are placing orders well in advance of when they actually need them; that way, they’re available when the infrastructure is ready for them to be plugged in. That gives Nvidia a better picture of what’s coming over the next few years than any investor or analyst, so when Nvidia tells you something big is coming, you’d better pay attention.
Next year, Nvidia expects to grow its revenue at a 70% year-over-year pace. Normally, a company growing at 70% is a smaller business seeing rapid adoption of its products, not a $5 trillion behemoth that already holds the title of the world’s largest company. This implies that the AI buildout is still going strong and that Nvidia is one of the best ways to invest in it.
With Nvidia expected to grow so quickly next year, you may think that some of this has already been priced into its stock, but you’d be wrong.
Nvidia’s stock looks like an absolute bargain
Nvidia looks cheap on multiple levels, but first I’ll just start with how it compares to the overall market. The S&P 500 (SNPINDEX: ^GSPC) trades for 25 times trailing earnings and 21 times forward earnings. That only places Nvidia with a slight premium to the overall market despite growing at a rapid pace this year and a projected one next year.
NVDA PE Ratio (Forward) data by YCharts
If next year’s growth is accounted for, the valuation looks incredibly cheap.
NVDA PE Ratio (Forward 1y) data by YCharts
At 14.8 times next year’s earnings, Nvidia’s stock is primed to skyrocket. If it hits analyst expectations and the stock trades at a 30 times trailing earnings multiple at the end of next fiscal year, that indicates the stock has the potential to double. A double in just over a year is downright incredible, but that’s the kind of value Nvidia is right now.
Compared to its peers, Nvidia also looks pretty cheap. Two of the most common stocks Nvidia is compared to are AMD (NASDAQ: AMD) and Broadcom (NASDAQ: AVGO). Both companies are competing against Nvidia’s GPU empire, but Nvidia remains the dominant force in the industry.
Despite that, Nvidia is far more reasonably priced than any of them.
NVDA PE Ratio (Forward) data by YCharts
I think this makes Nvidia both a strong buy overall and a strong buy relative to its peers. There’s really only one stock worth investing in in the AI hardware game right now, and it’s Nvidia. This is a great buying opportunity, and investors shouldn’t let it slip by.
Should you buy stock in Nvidia right now?
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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.