This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) revealed at its GTC conference last week that it has visibility into $500 billion of cumulative revenue through 2026 -- a disclosure that surprised Wall Street and prompted analysts to raise price targets. So is the stock a buy?

On the surface, the numbers leave little doubt. Q2 fiscal 2026 revenue jumped to $46.7 billion, with data center sales at $41.1 billion and gross margins topping 72%. The company returned $24.3 billion to shareholders through dividends and buybacks in the first half of fiscal 2026, with another $60 billion buyback authorized.

But warning signs are flashing. Restrictions on doing business in China threaten $30 billion in annual sales, customer concentration creates vulnerability (two customers represented 39% of Q2 revenue), and businesses continue questioning artificial intelligence's return on investment. Nvidia remains the backbone of AI infrastructure, but the easy money may already be priced in.

So, is there still upside, or has the market already priced in perfection? Let's break down the tech giant's outlook to find out.

The planned revenue changes everything

Nvidia's GTC disclosure caught analysts off guard. The company revealed it has a backlog -- meaning firm orders awaiting fulfillment -- with visibility into $500 billion of cumulative revenue for Blackwell and Rubin products in calendar 2025 and 2026.

Some on Wall Street called the disclosure "surprising," given its scale substantially above prior expectations. The disclosure suggests the AI supply chain is expanding even faster than anticipated.

China and competition create headwinds

Nvidia faces a new financial hurdle under an August 2025 export-license arrangement that requires the company to remit directly to the U.S. government 15% of the revenue from eligible AI chip sales to China.

U.S. officials confirmed the broad framework of the arrangement. It applies to chips like Nvidia's H20 in exchange for export licenses. The 15% payment cut reduces Nvidia's margins and lowers net income compared to a scenario without the levy, even if China sales resume at a tens-of-billions-of-dollars pace.

The greater concern centers on setting a policy precedent. Tying export permissions to a revenue-sharing agreement with Washington represents an unusual mechanism. Some analysts call it a de facto export tax that could tighten or broaden in future rule changes.

Furthermore, competition looms larger than investors acknowledge. Advanced Micro Devices is gaining ground with its MI300 chips. Broadcom dominates custom silicon for hyperscalers. Amazon, Alphabet, and Meta Platforms are accelerating in-house chip development right now.

Nvidia's moat remains formidable. But a 90% market share only moves in one direction: down.

Beyond the data center hype

The bear case often stops at today's AI boom, but that misses Nvidia's bigger play. Quantum research labs lean on Nvidia's CUDA platform. Robotics and autonomous vehicles depend on Nvidia's edge computing.

Industrial automation workloads demand accelerated computing that only Nvidia can deliver at scale. When AI training demand eventually cools, inference workloads, robotics, and scientific computing could add entirely new legs of growth. And then there's the quantum computing race, a potential trillion-dollar market where Nvidia is sure to play a key role over the next decade.

The verdict

Yes, Nvidia stock is a buy for long-term investors willing to stomach volatility. The $500 billion revenue visibility through 2026 provides unprecedented clarity on demand, while 72% gross margins and a dominant market position create a wide moat. Competition from AMD and custom chips will nibble at the edges, but Nvidia's CUDA ecosystem and first-mover advantage in AI infrastructure remain unmatched.

The risks are real -- China restrictions, customer concentration, and questions about AI return on investment could derail the thesis. But Nvidia's exposure extends beyond today's AI boom into quantum computing, robotics, autonomous vehicles, and industrial automation. These markets could add entirely new growth legs as AI training demand matures.

For investors with a three- to five-year horizon, Nvidia remains the definitive way to own the future of accelerated computing. The $500 billion visibility provides unprecedented demand clarity, while the company's CUDA ecosystem creates switching costs competitors can't easily replicate.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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George Budwell has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Revenue soared more than 50% to $46.7 billion with data center sales hitting $41.1 billion, while gross margins topped 72% and the board approved a fresh $60 billion buyback.
• Capital equipment spending has reached levels reminiscent of past tech bubbles, raising questions about whether AI investments can deliver promised returns.
• Beyond today's AI frenzy, Nvidia's positions in quantum computing, robotics, and industrial automation could drive the next decade of growth.

Nvidia (NASDAQ: NVDA) sits at the center of the artificial intelligence (AI) boom -- but investors are split on whether this is still the early innings or the final act of a bubble. The stock has surged 56% over the past six months, yet slipped 2% in the last 30 days (as of Sept. 26, 2025), reflecting growing unease.

On the surface, the numbers leave little doubt. Q2 fiscal 2026 revenue jumped to $46.7 billion, with gross margins topping 72%. But warning signs are flashing: capital spending at bubble-like levels, enterprises questioning AI's return on investment, and competitors eager to chip away at Nvidia's dominance. The truth likely falls between euphoria and collapse.

Nvidia remains the backbone of AI infrastructure, but the easy money may already be behind it. The key question for October: Is the stock still a buy, or has the market already priced in perfection?

The empire strikes back

Nvidia's latest quarter didn't just meet expectations -- it redefined them. Data center revenue soared to $41.1 billion, nearly double the company's total revenue from just two years ago. Shareholders were rewarded handsomely: $24.3 billion returned in the first half of fiscal 2026, with another $60 billion buyback locked and loaded. Those aren't defensive moves; they're a declaration of confidence in a cash machine that shows no signs of slowing.

The strategy also stretches beyond GPUs. A recent $5 billion stake in Intel signals Nvidia's intent to shape entire computing stacks, not just dominate acceleration. On the product front, the Blackwell architecture is ramping quickly, while Rubin and Feynman -- the next-generation chips already in the pipeline -- keep the roadmap full.

And then there are the customers. Microsoft, Amazon, and Alphabet can't build their AI ambitions without Nvidia silicon. When every hyperscaler depends on your hardware, pricing power follows. The 72% gross margins are the proof point -- not an aspiration, but a fact.

The bubble detective arrives

History suggests caution when capital spending reaches current extremes. Tech infrastructure investment now echoes 1999 -- today, AI replaces the internet as the narrative fuel, but the investment cycle looks strikingly familiar.

This circular validation creates dangerous echo-chamber economics, where each player's investment props up the next without clear evidence of end-user ROI. Microsoft invests in OpenAI, which buys Nvidia chips, which Microsoft cites as proof of AI demand.

Meanwhile, enterprises experimenting with AI report mixed results. Many pilot projects fail to scale, costs exceed budgets, and productivity gains prove elusive. If customers can't monetize AI, they won't keep buying $40,000 GPUs indefinitely.

Competition looms larger than investors acknowledge. Advanced Micro Devices gains ground with MI300 chips. Broadcom dominates custom silicon for hyperscalers. Amazon, Alphabet, and Meta Platforms accelerate in-house chip development. Even Intel's Gaudi processors show promise in this regard.

Nvidia's moat remains formidable, but 90% market share only moves in one direction from here -- down.

Beyond the data center hype

The bear case often stops at today's AI boom, but that misses Nvidia's bigger play. This isn't a one-trick company riding a temporary surge -- it has built hedges that extend its dominance into the next era of computing.

Take quantum computing research. The world's leading labs lean on Nvidia's CUDA platform and DGX systems to simulate quantum algorithms long before the hardware exists. In robotics, everything from warehouse automation to autonomous vehicles already depends on Nvidia's edge-computing solutions. And in industrial automation -- whether it's drug discovery, climate modeling, or materials science -- the workloads demand accelerated computing that only Nvidia can deliver at scale.

So when AI training demand eventually cools, Nvidia won't be left scrambling. Inference workloads alone could rival today's training revenue, and robotics or scientific computing could add entirely new legs of growth. At $4.3 trillion, the market may be pricing in perfection, but the company's portfolio hints at multiple acts still to come.

The October verdict

Nvidia's stock offers no easy answers heading into October. Bulls see unstoppable AI adoption, 72% margins, and a stranglehold on data center compute. Bears point to bubble-level valuations across the AI landscape, shaky ROI for AI investments to date, and rivals eager to chip away at Nvidia's dominance. Both sides have valid arguments.

For traders, the setup looks risky after a 56% six-month run -- even a small miss on Blackwell shipments or hyperscaler demand could spark a 20% to 30% pullback. For long-term investors, Nvidia remains the definitive picks-and-shovels play on the future of computing, with exposure not just to AI but also quantum, robotics, and industrial automation. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock a buy heading into October? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Microsoft and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Intel, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia controls the irreplaceable GPU infrastructure powering every major artificial intelligence (AI) model, with data center revenue hitting $41.1 billion last quarter.
• Meta Platforms' free LLaMA models are a Trojan horse for the world's most profitable advertising machine, generating $46.6 billion in quarterly ad revenue.
• Amazon's AWS dominates AI hosting with 31% market share, turning every company's AI adoption into recurring revenue streams.

The artificial intelligence (AI) revolution needs three things to function: the chips to run it, the models to power it, and the cloud to host it.

These three companies own those critical layers, making them permanent fixtures in the AI economy, regardless of which chatbot wins or which start-up goes viral.

The silicon monopoly

Nvidia (NASDAQ: NVDA) has turned AI compute into a tollbooth business. Every major AI breakthrough -- from ChatGPT to Midjourney to autonomous vehicles -- runs on Nvidia silicon.

Q2 fiscal 2026 total revenue hit $46.7 billion, up 56% year over year, with data center revenue alone reaching $41.1 billion. The company's Blackwell architecture is already sold out through 2026, with customers including Microsoft, Alphabet, and Meta Platforms (NASDAQ: META) placing orders measured in tens of thousands of units.

The moat goes deeper than just fast chips. CUDA, Nvidia's programming platform, has 5 million developers trained on its architecture -- a switching cost measured in years of retraining. Trading at 39 times forward earnings might seem rich, but consider this: 73% gross margins, $54 billion in Q3 guidance, and a new $60 billion buyback authorization. When Jensen Huang says "the next industrial revolution has begun," he's not being hyperbolic -- he's describing a market Nvidia already owns.

The attention merchant's AI play

Meta Platforms discovered something competitors missed: You don't need to charge for AI when you own the world's attention. The company's LLaMA models, given away free, have become the Linux of AI -- powering everything from start-up prototypes to enterprise deployments. Meanwhile, Meta's real AI runs behind the scenes, optimizing 3 billion daily users' feeds and delivering ads with surgical precision.

Q2 2025 revenue jumped 22% to $47.5 billion, with advertising alone generating $46.6 billion. Reality Labs burns over $4 billion quarterly chasing the metaverse, but that's a rounding error against $20 billion in quarterly operating income. The company sits on $47 billion in cash and marketable securities while trading at just 28 times forward earnings -- cheaper than most software companies by a wide margin. Meta's platforms generate billions of new posts, photos, and videos daily -- a proprietary training dataset no competitor can buy at any price.

The "everything store" for AI

Amazon (NASDAQ: AMZN) plays the ultimate arms dealer strategy -- it doesn't matter whose AI wins, as long as they're all paying AWS to run it. Q2 2025 saw AWS revenue hit $30.9 billion, up 17.5%, capturing 31% of global cloud infrastructure spending. The unit's 32.9% operating margins might be down from its prior peak, but that's because Amazon is aggressively building AI capacity. Its custom Trainium and Inferentia chips offer customers alternatives to Nvidia at 40% lower cost, while Bedrock makes deploying AI models as simple as clicking a button.

The bull case is straightforward: Amazon generated $121 billion in operating cash flow over the trailing 12 months, giving it unlimited firepower to build AI infrastructure. AWS's $195 billion backlog (up 25% year over year) locks in future revenue with multiyear contracts and massive switching costs. Every AI start-up, enterprise deployment, and government project strengthens the moat.

At 34.6 times forward earnings, Amazon trades like the toll road to the AI economy -- and that's precisely what it is.

The three pillars of permanent value

These aren't speculative AI bets chasing viral adoption. Nvidia dominates the compute layer, controlling more than 90% of the AI training GPU market. Meta owns the consumer layer, with 3 billion users generating unmatched training data for its algorithms. Amazon controls the enterprise layer, with cloud infrastructure and multiyear contracts that no start-up can replicate.

Hundreds of AI companies will rise and fall over the next decade, but these three will collect rent from all of them -- making them true buy-and-hold candidates for the long term.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Microsoft and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia's data center revenue hit $39.1 billion in Q1 FY26 alone, with Blackwell shipments ramping and Rubin systems coming before 2028.

• AMD and Intel are winning share at the margins but can't break Nvidia's CUDA ecosystem and supply chain advantages by 2028.

• Even with a potential government stake in Intel, the AI infrastructure buildout measured in trillions supports Nvidia's pricing power through the decade.

Wall Street is increasingly wary of growing competition in the artificial intelligence (AI) chip market. While Nvidia (NASDAQ: NVDA) continues to dominate with more than 80% of the AI training and deployment market, rivals are starting to score meaningful design wins. Advanced Micro Devices (NASDAQ: AMD) has secured adoption of its MI300X chips at Meta Platforms, Microsoft, and OpenAI. Meanwhile, Intel (NASDAQ: INTC) is in talks with the U.S. government about potential investment support to accelerate its manufacturing and foundry expansion.

Bears argue that Nvidia's market share is unsustainably high, especially in an industry prone to disruption, but that view misses the bigger picture. The AI hardware market is growing from hundreds of billions into the trillions, so even a smaller share of a much larger pie can drive enormous profit. More importantly, Nvidia retains a full-stack advantage that integrates hardware, Compute Unified Device Architecture (CUDA) software, ecosystem support, and developer adoption, creating a moat competitors have yet to match.

The trillion-dollar tailwind nobody's calculating correctly

Forget the hand-wringing about market saturation. The numbers tell a different story. The big four hyperscalers alone are on track to spend $300 billion on AI infrastructure in 2025, according to Morgan Stanley. Backend AI network switching, a direct proxy for graphics processing unit (GPU) cluster scale, will top $100 billion between 2025 and 2029, per Dell'Oro Group. Omdia forecasts that the cloud and data center accelerator market will reach $151 billion by 2029, with growth merely moderating, not reversing, after 2026.

Nvidia's first-quarter results of fiscal 2026 put this opportunity in perspective. Total revenue hit $44.1 billion for the quarter, with data center revenue alone generating $39.1 billion. That's not a typo -- $39.1 billion in three months from data centers. At this scale, even if Nvidia loses 10 points of market share, the absolute dollar opportunity keeps growing. When your addressable market is expanding by hundreds of billions annually, you don't need a monopoly share to compound revenue.

The moat everyone underestimates

Nvidia dominates not because it builds the fastest chips but because it owns the stack. CUDA has become the default environment for training large models, anchoring developers, frameworks, and tooling to Nvidia's ecosystem. NVLink and NVSwitch give its GPUs the ability to communicate at bandwidths PCI Express cannot match, allowing training to scale seamlessly across entire racks.

Upstream, the bottlenecks are even more decisive. Advanced packaging capacity for CoWoS at Taiwan Semiconductor is limited, even with output expected to roughly double in 2025 and expand again in 2026. Industry reports indicate that Nvidia has secured the majority of that allocation, leaving rivals with less room to ship at scale.

High-bandwidth memory is the second choke point. SK Hynix remains Nvidia's lead supplier, with Micron and Samsung Electronics still ramping up capacity. Priority access to next-generation High Bandwidth Memoty nodes ensures Nvidia's accelerators hit volume while others wait in line.

This combination of software lock-in, interconnect scale-out, and privileged supply allocation is not a fleeting edge. It is a structural moat measured in years. Even if competitors design strong alternatives, they can't reach meaningful volume without access to these same resources. That's why Nvidia's premium valuation is not just about market share. It's about owning the rails on which the AI economy runs.

Why AMD and Intel can't break the kingdom

AMD is real competition -- let's not pretend otherwise. Azure's ND MI300X instances are generally available, Meta publicly uses MI300-class chips for Llama inference, and OpenAI has signaled it will use AMD's latest chips alongside others.

ROCm 7 and the AMD Developer Cloud have genuinely improved software support. But here's the reality check: AMD's entire data center revenue was $3.2 billion last quarter, driven largely by EPYC central processing units, not GPUs. Nvidia does that in about a week.

AMD wins on price-performance for specific workloads, especially inference. It gives hyperscalers negotiating leverage and caps Nvidia's pricing at the margin. But breaking CUDA's gravity requires more than competitive hardware -- it needs a software revolution that won't happen by 2028.

Intel's situation is even more interesting with reports that the Trump administration is considering a government stake. If that happens, Intel gets cheaper capital, stabilized fabs, and preferential treatment for government contracts.

But it doesn't solve CUDA lock-in, NVLink scale, or Nvidia's platform cadence. Gaudi 3 is shipping through Dell Technologies' AI Factory and IBM Cloud, targeting better price performance than H100 on selected workloads. But it's still behind H200 and Blackwell in absolute performance and ecosystem support.

The path to 2028

The base case through 2028 is straightforward: demand growth plus platform innovation keep Nvidia atop training workloads while AMD and Intel expand as cost-optimized alternatives. Nvidia maintains 70% to 80% share in training and loses some inference share to cheaper alternatives but grows absolute revenue on market expansion. The bears worry about customized chips, power constraints, or supply shocks, but none of these threats materialize fast enough to derail the story before 2028.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Here's why Nvidia outperforms out to 2028 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 5 ASX ETFs that could supercharge your portfolio
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• 3 fantastic ASX ETFs to buy this month
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• Why now could be the time to buy these popular ASX ETFs

George Budwell has positions in Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, International Business Machines, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft, short August 2025 $24 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• A major policy reversal on Chinese AI chip exports has significantly improved the company's revenue outlook and enhanced its competitive positioning in the world's second largest economy.

• The semiconductor giant's data center business has exploded from $3 billion to $115 billion in annual revenue over just five years, yet supply constraints suggest this growth story is far from over.

• While trading at a premium valuation, the company's wide economic moat and expanding addressable market across AI training, inference, and emerging applications provide multiple avenues for growth.

Nvidia (NASDAQ: NVDA) is the epicenter of the artificial intelligence (AI) boom. In 2025, it became the most valuable company on Earth, minting millionaires and reshaping global tech. But with shares trading at 56 times trailing sales and the stock far outpacing the S&P 500, investors have a tougher question to ask now.

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Is Nvidia still a buy? Here's what the market is getting right -- and what it might be missing about this core AI stock.

China changes everything for Nvidia's growth trajectory

A major shift in U.S. policy has reopened a crucial revenue stream for Nvidia. Regulators recently approved shipments of the company's H20 graphics processors to China -- just weeks after restricting their sale.

This reversal changes the calculus. Nvidia had taken a $5.5 billion write-down earlier this year, tied to unsellable China inventory, and analysts feared it had lost access to one of its largest AI markets. But with H20 shipments now cleared, Wall Street expects Nvidia to generate $5 billion in China revenue over the next two quarters -- and as much as $30 billion across fiscal 2027 and beyond.

Though the H20 is throttled to comply with export rules, it remains in high demand. China's aggressive AI buildout makes even these constrained chips valuable -- and for now, irreplaceable.

More strategically, this decision keeps Chinese AI firms tied to U.S. hardware and software infrastructure. Rather than pushing demand toward domestic alternatives like Huawei, the policy reversal reinforces Nvidia's dominance. It strengthens the company's competitive moat just as the global AI infrastructure buildout hits escape velocity.

The data center dominance story is far from over

Nvidia's evolution from a gaming chipmaker into the backbone of global AI infrastructure is one of the most successful pivots in corporate history. Its data center revenue surged from around $3 billion in fiscal 2020 to over $115 billion by fiscal 2025 -- a five-year run of hypergrowth few companies have ever matched.

And it's not demand that's holding Nvidia back -- it's supply. The company remains constrained by manufacturing capacity, with graphics processing unit (GPU) availability expected to stay tight through at least December. Cloud giants such as Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Alphabet (NASDAQ: GOOGL) show no signs of easing their AI infrastructure spending. Several customers have said they'd buy every chip Nvidia can deliver.

This demand is no longer just about training large models. While training powered Nvidia's early surge, the inference market -- where deployed models generate real-time outputs -- is emerging as a bigger, longer-term opportunity. As generative AI tools spread across industries, both training and inference workloads are growing fast, supporting Nvidia's multibillion-dollar revenue streams even as the market matures.

Competitive threats are real -- but contained

The most credible risk to Nvidia's dominance comes from intensifying competition, both from traditional chip rivals and cloud giants building their silicon. Advanced Micro Devices (NASDAQ: AMD) is ramping up its GPU lineup with the MI300 series, while hyperscalers such as Alphabet, Amazon, Microsoft, and Meta Platforms (NASDAQ: META) continue to roll out custom AI chips for internal use.

But hardware is only part of the story. Nvidia's moat is as much about software as it is about silicon. The company's Compute Unified Device Architecture platform powers nearly every major AI model in production today, and migrating those codebases to alternative stacks is costly, complex, and time-intensive. For now, most developers simply aren't willing to switch.

Then there's networking, a less flashy but equally critical layer of Nvidia's strategy. Large AI models don't run on stand-alone chips; they run on interconnected clusters of GPUs. Nvidia's NVLink interconnect and its InfiniBand-based networking gear (inherited from the Mellanox acquisition) allow these clusters to function as a single, cohesive AI engine.

This integrated stack -- chips, interconnects, software, and systems -- makes Nvidia more than a parts supplier. It's the orchestrator of modern AI infrastructure, and that role is far harder to dislodge than many assume.

Valuation reflects optimism, but fundamentals support a premium

At 56 times trailing earnings, Nvidia's stock isn't cheap by traditional metrics. However, these multiples must be viewed against robust growth and broadening market opportunity. The company delivered $130.5 billion in total revenue in fiscal 2025, up 114% year over year, with data center revenue alone reaching $115 billion. Gross margin simultaneously expanded to 75%.

The key question isn't whether Nvidia deserves a premium valuation -- it does given its dominant market position and growth prospects. Rather, investors must assess whether the current premium adequately reflects both the upside potential and inherent risks in the AI infrastructure buildout. The China policy reversal provides a concrete catalyst for near-term revenue acceleration, while growing use cases in automotive, robotics, and edge computing offer additional growth vectors beyond the core data center business.

Looking ahead, Nvidia's three-year GPU roadmap through 2027 demonstrates the company's commitment to maintaining its technological edge. With new architectures planned annually and processing capabilities expanding dramatically, Nvidia appears well positioned to stay ahead of both traditional competitors and in-house alternatives from hyperscale customers.

Early innings or peak hype determine the buy case

For investors considering Nvidia at current levels, the investment thesis boils down to one fundamental question: Is the AI revolution in its early innings or approaching maturity? The evidence suggests we're still in the opening act. China's market reversal, persistent supply constraints, and Nvidia's roadmap dominance through 2027 with Blackwell, Rubin, and beyond point to expanding opportunities that dwarf today's already massive market.

The risks are real. Demand cyclicality, intensifying competition from hyperscalers building custom chips, and geopolitical uncertainties all merit careful consideration. Yet for investors convinced that artificial intelligence represents a generational shift, Nvidia's unique positioning at the intersection of hardware, software, and AI infrastructure makes it one of the most compelling ways to capitalize on this transformation.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock still a buy? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 5 ASX ETFs that could supercharge your portfolio
• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?
• Why now could be the time to buy these popular ASX ETFs

George Budwell has positions in Microsoft and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

While investors chase quantum moonshots like Rigetti Computing -- up over 1,100% over the prior 12 months -- and IonQ -- up nearly 500% over the same period -- Amazon (NASDAQ: AMZN) is quietly building the infrastructure to profit no matter who wins the quantum computing race.

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The e-commerce giant's Amazon Web Services (AWS) Braket platform already hosts quantum computing services from multiple providers, making it the Switzerland of the quantum wars. But Amazon isn't just playing host; it's also developing its quantum hardware, creating two distinct paths to profit from what could become a trillion-dollar market. This dual approach makes Amazon the most overlooked opportunity in the market for quantum computing.

AI is accelerating quantum timelines

Conventional wisdom says practical quantum computing remains decades away. Most experts point to persistent challenges with error rates, qubit stability, and the need for near-absolute-zero operating temperatures. They're probably wrong.

What skeptics often overlook is the recursive learning potential of artificial intelligence (AI). When AI systems can design better AI systems, progress compounds exponentially. DeepMind's AlphaFold solved protein folding -- a 50-year challenge -- in months. The same recursive improvement cycle is about to hit quantum computing.

IBM plans to deliver its fault-tolerant quantum computer, Starling, by 2029 -- years ahead of previous predictions. The company says its breakthrough error-correction techniques will enable a system 20,000 times more powerful than today's quantum computers. This accelerated timeline reflects how AI is helping solve quantum's biggest challenges faster than expected.

AWS Braket: The quantum cloud marketplace

While pure-play quantum companies race to build better hardware, Amazon has taken a different approach. AWS Braket, launched in 2019, enables developers to access quantum computers from D-Wave, IonQ, Rigetti Computing, and others through the cloud. Think of it as the App Store for quantum computing -- Amazon profits regardless of which hardware ultimately wins.

This isn't Amazon's first platform rodeo. AWS generated $107.6 billion in revenue in 2024, crossing the $100 billion mark for the first time. Braket follows the same playbook, charging for access time while avoiding the massive research and development (R&D) costs of developing quantum hardware alone.

Amazon's in-house hardware gives it a dual advantage

Amazon isn't content to be just a middleman. The company's Center for Quantum Computing at Caltech is developing its own quantum processors, giving it a hedge in case proprietary hardware becomes the key differentiator. It's the best of both worlds: platform fees today, breakthrough potential tomorrow.

Yes, quantum stocks have exploded. Companies like Rigetti Computing and IonQ sport billion-dollar valuations despite minimal revenue. Quantum Computing has surged by over 3,000% in the past year. But Amazon offers something these pure plays can't: a profitable business generating nearly $700 billion in annual revenue.

The numbers tell the story. Over $1.25 billion poured into quantum start-ups in Q1 2025 alone -- double the amount from the previous year. Moreover, Nvidia CEO Jensen Huang reversed course, calling quantum computing "imminent" rather than decades away. This admission added significant fuel to the quantum rally earlier this year.

Real customers, real revenue, no hype required

Unlike pure-play quantum companies burning cash on R&D, Amazon's Braket already serves paying customers. Volkswagen uses it for traffic optimization research. Goldman Sachs explores quantum Monte Carlo simulations for derivatives pricing. Roche investigates drug discovery applications.

These aren't science projects. Fortune 500 companies are spending real money to explore quantum's potential. As algorithms improve and hardware matures, experimental budgets will transform into production workloads -- all running on AWS.

The beauty of Amazon's model is its optionality. If quantum computing takes another decade to mature, AWS will keep printing money from traditional cloud services. If breakthroughs accelerate, Amazon will capture the infrastructure spending boom. Heads you win, tails you don't lose.

The valuation case

At just 24 times 2027 projected earnings, the market isn't pricing in quantum's massive potential upside for this tech stock. If quantum becomes a $100 billion market by 2035 and AWS captures even 30%, that's $30 billion in high-margin revenue -- comparable to AWS's entire business five years ago. With AWS operating margins above 35%, quantum could add meaningful earnings power. Yet, this optionality is barely reflected in the stock's current valuation.

Investors looking for quantum upside without the moonshot risk don't need to chase cash-flow-negative companies. Amazon offers something far more powerful -- a platform that profits from the entire ecosystem, combined with a mountain of revenue. In the next wave of disruption, the real winner may not be the one building the quantum computer, but the one powering them all.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has positions in D-Wave Quantum, IonQ, Nvidia, and Rigetti Computing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Goldman Sachs Group, International Business Machines, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Roche Holding AG and Volkswagen Ag. The Motley Fool Australia has recommended Amazon and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) is the defining technological innovation of our era. In just a few short years, AI is expected to reshape every corner of society.

Semi-autonomous robots may soon handle your laundry, then hop in a self-driving car to pick up groceries. Life is about to get radically different -- ideally, for the better.

At the center of this so-called Fourth Industrial Revolution is Nvidia (NASDAQ: NVDA), the leading supplier of AI chips powering everything from data centers to robotics. Thanks to its central position within the AI value chain, Nvidia's stock has delivered a remarkable 829% return over the past 36 months, turning a $10,000 investment into $92,880.

As incredible as that sounds, Palantir Technologies (NASDAQ: PLTR) has done even better. Over the same 36-month period, Palantir has returned an astonishing 1,744%, transforming that same $10,000 investment into $184,370, nearly double Nvidia's impressive gains.

Both companies are riding the same tidal wave -- but in different lanes. Nvidia builds the computational engine, while Palantir delivers the software layer that interprets the data and enables real-world decisions.

Which of these top innovation stocks is the better buy as a core AI holding?

Latest financial metrics

Nvidia's Q1 fiscal 2026 results (ended April 27, 2025) showcased both massive scale and new headwinds. Revenue hit $44.1 billion, up 69% year over year, with data center revenue specifically climbing 73% to $39.1 billion.

Still, the China situation is deteriorating rapidly. Nvidia lost $2.5 billion in H20 revenue in Q1 and expects to lose $8 billion in Q2 from new export licensing requirements. CEO Jensen Huang lamented that "the $50 billion China market is effectively closed to us," with market share in the country falling from 95% to 50% under these restrictions.

Palantir, meanwhile, is hitting "escape velocity." Q1 2025 revenue of $884 million grew 39% year over year, accelerating from previous quarters. U.S. revenue surged 55% to $628 million, with U.S. commercial revenue exploding 71% to $255 million, surpassing a $1 billion annual run rate for the first time in company history. Palantir also raised full-year 2025 guidance to $3.89 to $3.9 billion, representing projected annual growth of about 36% year over year.

Market opportunity and positioning

The global AI market is projected to surpass $826 billion by 2030, even on conservative estimates. Within this vast opportunity, Nvidia and Palantir Technologies occupy distinct positions along the AI value chain.

Nvidia leads the infrastructure layer, powering the compute backbone of AI. CEO Jensen Huang projects annual data center spending could exceed $1 trillion by 2028.

The company is evolving from a chipmaker into a builder of AI factories, with new partnerships to construct AI supercomputers across the U.S., Saudi Arabia, the UAE, and Taiwan. Its Blackwell Ultra architecture and DGX SuperPOD systems place Nvidia at the forefront of "agentic AI reasoning" -- a key step toward the emergence of autonomous, intelligent systems.

Palantir, by contrast, operates in the application layer, helping enterprises deploy AI across real-world use cases. CEO Alex Karp described the company as being "in the middle of a tectonic shift," as demand for large language models has "turned into a stampede." Unlike many AI companies focused on research or infrastructure, Palantir is already monetizing AI through government contracts and commercial deployments, giving it a practical foothold in the race to bring AI into everyday operations.

The valuation disconnect

Despite commanding massive revenue and leading the AI infrastructure space, Nvidia trades at 46 times trailing earnings, well below its five-year average price-to-earnings ratio (P/E) of 78. Its forward P/E of 30 suggests the market is accounting for China-related export risks and a natural deceleration in growth from its enormous base.

Palantir, by contrast, trades at valuation levels that challenge traditional metrics. The stock has a trailing P/E exceeding 600 and a forward ratio exceeding 230.

These elevated multiples reflect investor belief that Palantir is at a key inflection point. The market appears to be betting on the company's ability to sustain hypergrowth while expanding its margins, a high bar that leaves little room for missteps.

PLTR P/E Ratio data by YCharts.

The verdict

Palantir stock has been a phenomenal performer, but at 600 times earnings, perfection is already priced in. Any execution slip or slowdown in growth could prompt a sharp repricing. While its $3.9 billion revenue run rate is expanding rapidly, it remains relatively small, compared to the multitrillion-dollar AI market.

Nvidia offers a more compelling risk-reward profile. At 46 times earnings, roughly 40% below its recent historical average, the stock combines reasonable valuation with several powerful growth catalysts. The Blackwell product cycle is just beginning, and robotics -- a largely overlooked segment -- could become a significant driver over the next decade.

Palantir remains a compelling long-term growth story, but its current valuation demands flawless near-term execution. In this match-up, Nvidia stands out as the stronger core AI investment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Nvidia and Palantir Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Palantir Technologies. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tech stocks have driven the bulk of market gains over the past two decades, fueled by relentless innovation and digital transformation. But as investors continue to bid up the usual suspects, truly compelling value opportunities have become increasingly scarce in the big tech arena.

Amazon (NASDAQ: AMZN), however, remains a notable exception. Despite robust business fundamentals, the stock has underperformed in 2025, falling 6.3% year to date. That disconnect presents a compelling opportunity. Here are three reasons Amazon stock looks like a rare bargain at current levels.

Reason 1: Amazon Web Services is still a cash machine, and growing fast

Amazon Web Services (AWS) continues to be the company's main profit engine. In Q1 2025, AWS posted revenue of $29.3 billion, up 17% year over year, and generated $11.5 billion in operating income -- far surpassing the profitability of Amazon's other operating segments.

AWS holds roughly 30% of the global cloud infrastructure market, ahead of Microsoft Azure, at around 21%, and Alphabet's Google Cloud, at about 12%. That dominant position, coupled with enterprise demand for artificial intelligence (AI) and machine learning workloads, provides Amazon with high-margin, recurring revenue that's only accelerating.

Best of all, CEO Andy Jassy recently noted that AI-related workloads on AWS are growing at triple-digit rates, driven by companies deploying generative AI tools and large language models across every industry vertical. That's a massive opportunity for savvy investors.

Reason 2: Robotics is reshaping the economics of fulfillment

Amazon has quietly become a global leader in automation. More than 750,000 robots now operate within its fulfillment network, from mobile drive units that move shelves to advanced systems such as Sparrow and Cardinal that handle complex sorting tasks.

The latest robotic fulfillment centers process orders roughly 25% faster and cut the cost to serve by about 25%, particularly during peak shopping periods. As of this year, around 75% of Amazon customer orders involve some form of robotic assistance.

Analysts at Morgan Stanley estimate that warehouse automation could yield $10 billion in annual cost savings by 2030 for the e-commerce giant. With a decade-long lead and full-stack robotics integration, Amazon is building a logistics moat its rivals will struggle to match.

Reason 3: It has early leadership in quantum computing

Amazon's investment in quantum computing remains under the radar, but it could ultimately prove to be one of its most transformative bets. Through AWS Braket, Amazon has created a unified platform that allows researchers and developers to access quantum hardware from multiple providers, run hybrid quantum-classical algorithms, and simulate quantum environments, all within the familiar AWS cloud ecosystem.

This isn't just a sandbox for academics. Braket is actively being used by Fortune 500 companies and government agencies exploring next-generation use cases in drug discovery, logistics optimization, materials science, and quantum encryption. By embedding quantum tools directly into its existing cloud infrastructure, Amazon ensures that as the technology matures, AWS customers will already be in a position to integrate it seamlessly into real-world applications.

Although widespread quantum utility is still years away, Amazon's early investment and infrastructure advantage could make it the dominant provider once the field crosses into commercial viability. Much as AWS quietly captured the cloud market a decade ago, Amazon is laying the groundwork now to lead in quantum when the moment arrives.

The investment case for Amazon

Amazon offers a rare blend of growth, scale, and long-term optionality. AWS alone supports a premium valuation, but the company's robotics and automation strategy is rewriting the economics of its core business. Meanwhile, strategic bets on emerging technologies such as quantum computing and satellite broadband (by way of Project Kuiper) create optionality that few peers can match. Despite these strengths, Amazon stock trades at just 31.8 times forward earnings, an attractive entry point for investors seeking durable growth at a reasonable price.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has positions in Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Amid the rubble of President Donald Trump's escalating trade war, Nvidia (NASDAQ: NVDA), the semiconductor powerhouse fueling the artificial intelligence (AI) revolution, has watched its share price crumble 28% since the start of 2025.

With the company's shares now trading at just 16.3 times 2028 projected earnings in response to Microsoft's slowing data center construction and America's newly implemented reciprocal tariffs, this historically cheap valuation may represent a once-in-a-generation buying opportunity for patient investors. Here's why.

Strengthening industry partnerships amid market turbulence

While investors worry about spending slowdowns in AI, Nvidia continues cementing strategic partnerships that expand its already vast technological moat. Most recently, the chipmaker announced a significant collaboration with Alphabet through its Google Cloud division to bring agentic-AI capabilities to enterprises using the Nvidia Blackwell platform.

Agentic AI systems actively make decisions, solve problems, and function autonomously, unlike traditional models that simply respond to specific prompts. These advanced systems operate more independently, completing complex tasks without constant human direction, which opens new possibilities for enterprise automation and intelligence.

This partnership addresses critical confidential computing needs, allowing organizations to locally harness Google's Gemini AI models while maintaining data sovereignty and regulatory compliance. For industries handling sensitive information like healthcare, finance, and government, this collaboration enables AI innovation without compromising security, creating an entirely new market segment for Nvidia's hardware.

Pioneering robotics and physical AI

Nvidia is also making significant inroads into robotics and physical AI systems. At the recent GTC conference in San Jose, California, the company showcased numerous robotic applications powered by its technology, from surgical robots to autonomous delivery systems. These physical embodiments of AI represent another massive growth vector beyond data centers.

The economic impact of robotics by 2035 can't be overstated. According to recent market forecasts, the global robotics market is projected to grow from $65 billion in 2024 to a staggering $376 billion by 2035, representing a compound annual growth rate of 17%.

The humanoid robot segment alone is expected to reach $38 billion by 2035, a sixfold increase from earlier projections only a few years ago. This dramatic upward revision reflects accelerating AI progress, particularly in multimodal physical AI that can perceive, understand, and interact with the three-dimensional world.

For instance, Nvidia's Isaac Sim software platform enables developers to create and train robotic systems in simulated environments before deploying them in the real world. This novel capability was demonstrated through robotic arms that could precisely mirror human movements, opening up a range of real-world applications from manufacturing to healthcare.

Why Nvidia's competitive advantage is unassailable

Despite headwinds, Nvidia's market leadership in graphics processing units (GPUs) and AI acceleration remains unchallenged. The company's GPUs process data in parallel, with unmatched efficiency, making them ideal for AI workloads, while its proprietary Compute Unified Device Architecture (CUDA) software platform creates enormous switching costs for customers, protecting its market position against emerging competitors.

What truly differentiates Nvidia is its expanding footprint across the entire AI stack, from hardware to networking, software, and services. The recently announced Blackwell platform and partnerships with major cloud providers demonstrate how the company continues pushing technological boundaries while deepening integration into enterprise AI ecosystems. All in all, Nvidia's core competitive advantages are unlikely to be usurped by competitors anytime soon, creating a healthy margin of safety for long-term investors.

Nvidia stock is a downright bargain at current levels

At 16.3 times 2028 earnings, Nvidia stock offers tremendous value. After all, the chipmaker is pioneering the next computing paradigm. While tariffs and big-tech spending fluctuations present meaningful near-term risks, the company's strengthening partnerships and expanding technological capabilities position it for sustained leadership in the unstoppable AI revolution.

What are the risks? The bearish case centers on potential competition from in-house chip development by major tech companies and possible migration to alternative open-source tools challenging CUDA's dominance. Additionally, historical boom-and-bust cycles in Nvidia's gaming segment contribute to its near-term risk profile.

Nevertheless, for investors with the patience to weather trade-war disruptions, the stock's current valuation offers an attractive entry point. Agentic AI and advanced robotics, after all, should prove to be extraordinary catalysts for the stock over the next 10 to 20 years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Nvidia stock could be tech's biggest bargain in 2025 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. George Budwell has positions in Microsoft and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) has unleashed a technological revolution, and one company sits at its very core. Nvidia (NASDAQ: NVDA) powers nearly every major AI breakthrough, from autonomous vehicles to drug discovery to advanced robotics. The company's technological dominance in this revolutionary field has driven its stock price up an astounding 2,127% over the past five years.

At first glance, Nvidia's valuation might cause investors to pause. The company's shares trade at an eye-catching 31.7 times forward earnings, well above the S&P 500's 23.5 multiple, which also happens to be on the high side, historically speaking. Yet this premium reflects something extraordinary: Nvidia's commanding position in computing's next great transformation. As we enter the age of intelligent machines, here are three compelling reasons why Nvidia deserves a permanent place in long-term portfolios.

Reason No. 1: Data center dominance

According to a report from Markets and Markets, the global data centre chip market is set to reach a mind-boggling $390.65 billion by 2030, growing at 13.5% annually from 2025. According to industry analysts, Nvidia controls around 80% of the AI chip market, with its chief rival in the space, Advanced Micro Devices, holding approximately 11% of the segment.

This market dominance stems from Nvidia's early lead in parallel computing architecture. The company's graphics processing units (GPUs) process multiple calculations simultaneously, making them vastly more efficient than traditional processors for AI workloads.

Furthermore, Nvidia's Compute Unified Device Architecture software platform has become the industry standard for AI development across financial services, healthcare, and retail. This entrenched ecosystem creates high customer switching costs, making it increasingly difficult for competitors to gain meaningful traction.

With an insurmountable lead in key hardware and software segments, Nvidia's grip on the AI chip market appears unshakeable for years to come.

Reason No. 2: Innovation beyond graphics

Nvidia's latest chip designs demonstrate its expanding technological capabilities beyond traditional graphics processing. The company continues to set new performance benchmarks while making AI computing more accessible to developers and businesses.

The expansion into developer-focused products opens new revenue streams without cannibalising high-end data centre sales. This multitiered strategy allows Nvidia to capture value across the entire AI computing spectrum.

The company's innovation pipeline extends into AI-powered gaming, self-driving vehicles, and advanced robotics. These initiatives showcase Nvidia's ability to leverage its core technology into entirely new markets.

Its technological leadership has created multiple growth engines that reduce reliance on any single market. With breakthroughs spanning multiple industries, Nvidia's impact on computing extends far beyond its gaming origins.

Reason No. 3: Strategic AI investments

Nvidia's investment portfolio targets companies at the forefront of AI applications. Recent investments include Applied Digital, a data centre provider specialising in AI infrastructure; Serve Robotics, a leader in autonomous delivery robots for last-mile delivery; and Recursion Pharmaceuticals, which uses AI to revolutionise drug discovery.

These strategic stakes give Nvidia early insight into emerging AI applications. Serve Robotics demonstrates AI's potential in automation, while Recursion shows how AI can accelerate pharmaceutical research. Applied Digital's focus on AI-optimised data centres strengthens Nvidia's position in computing infrastructure.

Each investment targets a distinct market where AI promises disruption. Recursion aims to reduce drug development timelines from decades to perhaps weeks or even days, while Serve Robotics seeks to transform last-mile delivery through autonomous robots and drones.

These forward-looking investments position Nvidia to capitalise on AI adoption across multiple industries. By backing innovators in robotics, drug discovery, and computing infrastructure, Nvidia gains valuable insights into how these nascent markets are developing while simultaneously expanding its technological moat.

A generational investment opportunity

Nvidia's dominance in AI computing extends far beyond its current core area of expertise in chip design. The company has built an ecosystem of hardware, software, and development tools that makes it essential to AI advancement.

While the tech stock's valuation reflects high expectations, Nvidia's expanding competitive advantages and massive growth opportunities justify its premium. For investors seeking exposure to this ongoing technological revolution reshaping modern society, Nvidia represents a foundational holding built to compound value for decades to come.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons Nvidia stock is a forever buy and hold appeared first on The Motley Fool Australia.

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George Budwell has positions in Nvidia and Serve Robotics. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Serve Robotics. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia Corporation (NASDAQ: NVDA) shares dipped 3.4% in response to its fiscal 2025 third-quarter results last week, but I see this modest move lower as an opportunity to add to my position. While analysts project the company's revenue growth to slow from 111.9% in fiscal 2025 to 49.2% in fiscal 2026, I remain convinced of this technology giant's fundamental story.

I'm particularly excited about the opportunity that lies ahead in artificial intelligence (AI). Major cloud providers plan to invest $267 billion in AI infrastructure next year alone, a 33.5% increase from current levels. This unprecedented buildout positions Nvidia, with its 80% market share in AI chips, at the centre of what Amazon CEO Andy Jassy calls a "once-in-a-lifetime" opportunity.

Here's a full breakdown of why I plan to continue to buy shares of this AI titan despite its slowing growth trajectory.

A leader in AI infrastructure

Nvidia's latest results demonstrate its dominance in AI computing. The company reported record data centre revenue of $30.8 billion for its fiscal 2025 third quarter, up 112% year-over-year. This staggering growth reflects insatiable demand from major cloud providers who are racing to build AI capabilities.

Microsoft is expected to spend $80 billion on total infrastructure in 2024, while Alphabet and Amazon have earmarked $51 billion and $75 billion, respectively, for their capital investments, with AI infrastructure being a major focus.

CEO Jensen Huang describes current AI demand as "insane," with the total addressable market for AI accelerators projected to grow over 60% annually to reach $500 billion by 2028, according to Advanced Micro Devices (AMD) CEO Lisa Su. This rapid market expansion isn't just about current applications; the entire industry is preparing for the next wave of AI breakthroughs.

Reasonable valuation amid the AI gold rush

At 33.6 times forward earnings, Nvidia trades at a premium to the S&P 500's 23.8 multiple but remains reasonably valued given its growth trajectory. After all, a company growing revenue by more than 100% year over year with industry-leading profitability deserves to trade at a premium multiple.

What's more, the company's pricing power tells a compelling story. Gross margins reached a sizzling 74.6% in the most recent quarter on a generally accepted accounting principles (GAAP) basis, demonstrating exceptional operational efficiency even as production scales to meet surging demand. This pricing power stems from continuous technological innovation.

Evidence of this innovation appears throughout Nvidia's product line. The H200 chip, which delivers up to 2 times faster inference performance and up to 50% improved total cost of ownership according to management, has seen significant sales growth and is now being deployed by major cloud providers including AWS, CoreWeave, and Microsoft Azure. Meanwhile, its next-generation Blackwell platform has entered full production, promising even greater performance gains in the years ahead.

Time to buy?

While Nvidia's growth rates may be cooling from their torrid pace, I remain convinced of the company's long-term potential. After all, major cloud providers plan to accelerate AI investments in the years ahead, and enterprise adoption is just beginning. According to CEO Jensen Huang, "$1 trillion worth of computing systems and data centres around the world is now being modernized for machine learning."

Moreover, the entire space is approaching a potential "Gutenberg moment" with the possible advent of artificial general intelligence (AGI) -- AI systems capable of performing any intellectual task that humans can -- within the next two to three years. Such a breakthrough would require massive computing power, likely driving even greater demand for Nvidia's specialised chips.

A normalising growth rate might spook some investors, but I see a much bigger picture emerging. With its dominant market position, expanding technological lead, and the massive AI infrastructure buildout still in the early stages, I'm using this latest dip to aggressively add to my position in this AI juggernaut.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's growth may be cooling, but here's why I'm still buying appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Microsoft and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In January 1999, a small graphics chip company called Nvidia (NASDAQ: NVDA) went public at $12 per share. Few could have predicted that this Silicon Valley start-up would one day become the world's most valuable semiconductor company.

A mere $500 investment in Nvidia's IPO would be worth around $1.88 million today, assuming dividends were reinvested, significantly outperforming the S&P 500 over the same period.

NVDA data by YCharts

Let's explore how this remarkable transformation unfolded, from its humble beginnings in a California diner to its current position at the forefront of the artificial intelligence (AI) revolution.

A vision that transformed computing

Nvidia's journey began in a Denny's restaurant near San Jose, where founders Jensen Huang, Chris Malachowsky, and Curtis Priem sketched out their vision for revolutionizing computer graphics. Their innovation-the graphics processing unit (GPU)-would transform pixelated characters into lifelike images.

The company's initial focus on gaming would later prove crucial to its expansion into AI and data centers. This foundation in gaming technology provided the expertise needed for future breakthroughs.

The parallel processing breakthrough

Nvidia's spectacular rise stems from its pioneering GPU architecture, which executes millions of calculations simultaneously. While this parallel processing capability first transformed gaming graphics, it later proved ideally suited for AI applications.

Today, Nvidia's chips serve as the computational backbone for a vast ecosystem--from autonomous vehicles to major cloud platforms like Amazon Web Services and Microsoft Azure. The adaptability of GPU technology has unlocked multiple high-growth markets, suggesting the company's technological advantages may only be beginning to bear fruit.

A history of strategic adaptation

Nvidia's ability to pivot into new markets has been remarkable. The company recognised early that its GPU technology could extend beyond gaming.

In 2006, Nvidia unveiled the Compute Unified Device Architecture (CUDA), a breakthrough platform that transformed its graphics processors into versatile computing engines. This strategic innovation proved prescient, positioning Nvidia at the vanguard of the AI revolution.

By enabling GPUs to handle complex computational tasks beyond graphics, CUDA helped Nvidia build an unprecedented competitive advantage in what would become one of the world's most lucrative and transformative technology markets.

The AI catalyst

The rise of AI has supercharged Nvidia's growth. The company's data centre revenue reached $26.3 billion in the latest quarter, representing a 154% increase year over year.

The AI boom has propelled Nvidia to a market value of $3.47 trillion today. Earlier this year, the chip maker briefly surpassed fellow tech behemoths Microsoft and Apple to become the world's most valuable publicly traded company.

A stock split success story

Stock splits have played a significant role in Nvidia's shareholder-friendly approach. The company has conducted six splits since going public, most recently a 10-for-1 split in June 2024.

Through these splits, one original share has multiplied into 480 shares, making the stock more accessible to individual investors. Each split has maintained the same market value while increasing the number of shares available.

Where is Nvidia headed?

Nvidia is charting an ambitious course with its next-generation Blackwell architecture, engineered specifically for AI workloads. Industry analysts project these chips will drive billions in revenue by early 2025. CEO Jensen Huang envisions a $100 trillion AI economy, suggesting the semiconductor industry's transformation is just beginning.

The company's extensive R&D investments, paired with its deepening foothold in enterprise AI solutions, indicate its remarkable growth trajectory may still be in its early stages. Through strategic alliances with major cloud providers and robotics innovators, plus an expanding portfolio of software solutions, Nvidia appears well-positioned to capitalise on the next wave of AI adoption.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Apple, Microsoft, and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia's (NASDAQ: NVDA) stock has been on a tear. The company's shares have surged 145% year to date, dwarfing the S&P 500's gains. This otherworldly performance for a megacap stock extends beyond the short term. Nvidia's shares have skyrocketed 487% over the past three years and an astounding 2,740% over the past five years.

Despite this astronomical rise, Nvidia's long-term valuation remains attractive. The stock trades at 28.5 times fiscal 2027 projected earnings, which isn't outlandish for a top-tier tech company. Still, investors have openly wondered whether Nvidia's outperformance can continue. Here are three compelling reasons the chipmaker's shares remain a top buy-and-hold candidate.

Reason No. 1: Rewarding shareholders through buybacks and dividends

Nvidia has demonstrated a strong commitment to returning capital to shareholders. The company repurchased 62.8 million shares for $7 billion in the second quarter of fiscal year 2025 alone, according to its latest 10-Q filing with the Securities and Exchange Commission.

Nvidia's board recently approved an additional $50 billion for share repurchases, bringing the total available to $53.9 billion as of Aug. 26. This substantial buyback authorization underscores management's confidence in Nvidia's long-term prospects.

While its dividend program is usually an afterthought for most shareholders because of its 0.03% minuscule yield, the company did boost its quarterly cash dividend to $0.01 per share on a post-stock-split basis earlier this year. This increase, though small, underscores management's commitment to rewarding loyal shareholders.

These capital return initiatives demonstrate Nvidia's commitment to creating shareholder value. The combination of aggressive share repurchases and consistent dividend growth provides investors with multiple avenues for returns, setting Nvidia apart from many high-growth tech companies that forgo dividends entirely in favor of reinvesting in the business.

Reason No. 2: Riding the AI wave

Nvidia is perfectly positioned to capitalize on the artificial intelligence (AI) boom. The company's graphics processing units (GPUs) are the gold standard for AI and machine learning applications. This dominance is reflected in Nvidia's data center revenue, which is experiencing explosive growth.

Industry experts predict that AI will have a transformative impact on the global economy. Consulting firm Accenture forecasts that AI could double annual global economic growth rates by 2035. PricewaterhouseCoopers estimates that global GDP may increase by up to 14%, or $15.7 trillion, by 2030 thanks to AI adoption.

Nvidia's technological leadership in AI hardware puts it at the forefront of this revolution. The company's GPUs are essential for training large language models and powering AI-driven applications across industries. As AI adoption accelerates, Nvidia stands to benefit from increased demand for its specialized hardware.

Reason No. 3: Increasing data center growth

Nvidia CEO Jensen Huang envisions a future where "millions of GPU data centers" power AI interactions across the internet. This vision is rapidly becoming a reality. Major tech companies are dramatically increasing their GPU purchases, with Microsoft planning to triple its GPU supply to 1.8 million units this year.

Other tech giants are following suit. Meta Platforms has announced orders for 150,000 H100 GPUs last year and 350,000 H100s or equivalents this year. Elon Musk's Tesla and X are also investing heavily in AI infrastructure, further ramping up demand.

Industry analysts project even more dramatic growth. Broadcom expects million-GPU clusters by 2027, compared with clusters with tens of thousands of GPUs today. Advanced Micro Devices CEO Lisa Su predicts the AI accelerator market will reach $400 billion by 2027.

With Nvidia's dominant market share, this could translate to a data center segment worth $320 billion for the company by 2027. To put this into context, Nvidia is on track to generate between $106 billion to $121 billion (a rough estimate) in data center revenue in fiscal 2025.

The road ahead

Nvidia's stock performance has been nothing short of extraordinary. The company's commitment to shareholder returns through buybacks and dividends demonstrates confidence in its long-term prospects. Most importantly, Nvidia's central role in the AI revolution positions it for continued growth.

While past performance doesn't guarantee future results, Nvidia's technological leadership and strategic positioning make it a compelling choice for investors looking to capitalize on the AI megatrend. The company's ability to innovate and adapt to rapidly changing market demands will be crucial as it navigates the exciting but competitive landscape of AI.

As AI applications become more prevalent across industries, Nvidia's hardware is likely to play an increasingly vital role in powering these technologies. The company's strong financial position and focused strategy provide a solid foundation for future growth.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 compelling reasons Nvidia stock remains a top pick appeared first on The Motley Fool Australia.

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George Budwell has positions in Microsoft and Nvidia. 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. The Motley Fool Australia‘s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market has a long history of creating bubbles, particularly in the technology sector. However, when it comes to Nvidia (NASDAQ: NVDA), the chip maker's eye-popping valuation may not actually be signs of a bubble. Rather, it might reflect a deeper truth about the rapidly evolving state of artificial intelligence (AI).

Nvidia's shares are currently trading at 77.1 times trailing earnings, a lofty valuation by historical standards and rich even for the high-growth tech sector. This has led some investors to question whether it's time to take profits on Nvidia stock. After all, the chipmaker's shares are up by a staggering 206% over the prior 12 months.

However, several lines of evidence suggest that Nvidia's growth story is still in the early innings and that AI is on track to fundamentally alter the world. Here is a look at five key tailwinds that should power Nvidia's shares even higher over the next several years.

Five key themes

First, the general population remains largely unaware of the true power of AI. This situation is set to change dramatically later this year as Apple integrates AI into its ecosystem and Amazon strives to make Alexa smarter with AI.

As a broad base of consumers begin to experience the benefits of AI in their daily lives, demand for AI-powered products and services will likely skyrocket, driving substantial revenue growth for companies like Nvidia that provide the architecture behind the technology.

Second, the pace of AI development is accelerating. The exponential growth of computing power has put humanity on the doorstep of a series of "Gutenberg moments", or events that completely upend the status quo.

This quickening pace of innovation implies that rivals probably won't have time to challenge Nvidia's dominant position in the AI-capable graphics processing unit (GPU) space. While competitors like Advanced Micro Devices and Intel are aiming to cut into Nvidia's dominant market share, the window of opportunity is closing.

Third, the AI arms race between leading American firms, and the U.S. and China more broadly, won't allow developers time to create alternative ecosystems.

The race to achieve artificial general intelligence (AGI) is on, and Nvidia's superchips like Blackwell will likely be the primary drivers of this transformation. As companies and nations scramble to gain a competitive edge in AI, Nvidia's technology will remain in high demand.

Fourth, the advent of AI won't follow any rules established by prior transformational technologies like the internet or cars. AI can potentially alter human society at a fundamental level, and it will happen in less than five years.

Traditional valuation metrics and historical precedents, in turn, may not wholly apply to groundbreaking companies like Nvidia.

Fifth, the potential applications of AI are virtually limitless, spanning across industries such as healthcare, finance, transportation, and more. As AI becomes more sophisticated and ubiquitous, it will create entirely new markets – many of which are unimaginable today.

Nvidia, with its cutting-edge AI technology and growing customer base, is in the catbird seat.

Key takeaways

Nvidia's current valuation may seem high by historical standards. But it's important to consider the company's unique position in the rapidly evolving AI landscape.

With the general population largely unaware of AI's already incredible capabilities, the quickening pace of development, and an ongoing arms race, Nvidia should continue to post record-breaking revenue growth in the coming years.

After all, Nvidia's potential is truly unprecedented as the gatekeeper to a $100 trillion AI-based economy. Viewed in this context, the growing bubble talk around the chip maker's shares seems unjustified. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 5 Reasons Nvidia isn't in an AI-fueled bubble appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Why now could be the time to buy these popular ASX ETFs

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Amazon, Apple, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has built a reputation as a master of traditional value investing. His approach, which involves identifying undervalued companies with strong fundamentals and holding them for the long term, has proven successful for decades.

However, as the world stands on the cusp of an artificial intelligence (AI) revolution, it's worth examining whether Berkshire Hathaway's stock portfolio is adequately prepared for the potential disruption.

This analysis is rapidly becoming an urgent necessity, as AI is poised to enter a period of unprecedented, exponential growth. The convergence of advancements in computing power and the massive influx of capital, with tens of billions of dollars being invested in AI-capable data centers, is set to propel AI development forward at a breakneck pace in the next 18 months.

Buffett has rarely been a fan of cutting-edge tech

Buffett's stance on cryptocurrencies, particularly Bitcoin, has been unequivocal. In 2018, he famously described Bitcoin as "probably rat poison squared" and expressed his belief that cryptocurrencies would "come to a bad ending."

While his skepticism toward Bitcoin may be warranted, it raises questions about his outlook on the broader technological landscape, including AI.

The AI revolution promises to bring about profound changes across industries, with the potential for both direct and knock-on effects that prove to be disruptive. For instance, the insurance industry, a key area of focus for Berkshire Hathaway, could undergo substantial transformations as AI improves risk assessment and automates claims processing. It also faces disruptions from the advent of an array of autonomous vehicles.

Moreover, the financial sector, which forms a significant portion of Berkshire Hathaway's portfolio, may be particularly vulnerable to AI-driven disruption. As AI algorithms become more sophisticated, they could potentially replace human analysts and traders, creating both new opportunities and novel risks for the sector.

Berkshire Hathaway's significant exposure to the energy sector is another area of concern in the age of AI. For example, AI-driven advancements in renewable energy, smart grid technologies, and autonomous green vehicles, among others could significantly diminish the earnings power of traditional oil and gas companies by the decade's end, negatively impacting the value of Berkshire Hathaway's holdings in this sector.

Berkshire Hathaway does have an AI hedge

However, it's important to note that Berkshire Hathaway's stock portfolio does include potential AI hedges. The company's substantial stake in Apple (NASDAQ: AAPL), which recently announced the advent of "Apple Intelligence," could help mitigate the risks associated with widespread technological disruption.

Apple's ecosystem of AI-powered devices, services, and user experiences may help it navigate the changing landscape in the next stage of humanity. Still, the conglomerate's lack of significant exposure to companies at the heart of the AI revolution is arguably another underappreciated risk factor.

What's the big picture?

While Buffett's value investing approach has stood the test of time, it's crucial to consider whether it adequately accounts for the game-altering potential of the AI revolution. Traditional metrics, such as price-to-earnings ratios and book value, may not fully capture the disruptive impact of AI on industries and business models.

For instance, companies that appear undervalued based on historical data may face unexpected challenges as AI reshapes the competitive landscape. Meanwhile, businesses at the forefront of AI could continue to experience ultra-rapid growth, despite their premium-laden valuations.

Berkshire Hathaway's stock portfolio doesn't reflect this important dynamic. Instead, the conglomerate's equity portfolio is crafted to leverage its massive positions in dividend-paying companies, thereby creating value for shareholders through compounding.

This strategy has worked like a charm historically, thanks to the company's size and long-term holding strategy. However, if these income streams are disrupted by unforeseen quantum leaps in innovation, Berkshire Hathaway's core value-creation strategy may come under pressure.

Key takeaways

In ordinary times, contemplating such a drastic shift in the investing landscape would be an exercise in futility, unworthy of serious consideration. However, we are on the precipice of an unprecedented era, propelled forward by technological innovation's relentless, exponential growth.

This exponential progression is not a hypothetical or a distant possibility. It's a stark reality that investors will have to grapple with in the imminent future. The rapid pace of change, fueled by a coming abundance of intelligence, is poised to reshape industries, disrupt traditional business models, and redefine the core tenants of portfolio construction. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Warren Buffett meets AI: Is Berkshire Hathaway prepared for technological disruption? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Berkshire Hathaway, and Bitcoin. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) CEO Warren Buffett is widely considered a legend on Wall Street, and for good reason. The conglomerate's portfolio has substantially outperformed the benchmark S&P 500 since Buffett became CEO in 1965. 

The graph below illustrates this point:

BRK.A Total Return Level data by YCharts

A contrarian approach to investing

Moreover, Buffett's investing methodology runs counter to modern portfolio theory and the efficient markets hypothesis.

Modern portfolio theory advocates for diversification as a risk-management strategy. According to this theory, spreading investments across various assets reduces risk, thereby increasing the probability of generating positive annual returns.

However, Buffett's approach is anything but diversified. Berkshire Hathaway's portfolio is concentrated, with approximately 50 stocks in its holdings at the time of this writing.

Moreover, a select few equities such as Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), American Express (NYSE: AXP), Chevron (NYSE: CVX), Coca-Cola (NYSE: KO), and Occidental Petroleum (NYSE: OXY) account for a staggering 76.6% of the conglomerate's stock investments.

By contrast, most of Buffett's money manager contemporaries have typically crafted portfolios consisting of hundreds -- and sometimes thousands -- of equities, in line with the main tenet of modern portfolio theory.

Buffett and his team have also overcome the potentially disadvantageous effects stemming from the legal requirement to disclose their quarterly buys and sells. The efficient market hypothesis suggests that such disclosures should nullify Buffett's edge by allowing other investors to mimic his portfolio.

Surprisingly, this constraint hasn't significantly impacted the company's ability to deliver excess returns relative to the broader market.

In 2024, for instance, Berkshire Hathaway's shares have outperformed the sizzling S&P 500, and historically, the company has delivered returns in excess of the broader market by around 8 percentage points per year.

Can Berkshire Hathaway keep beating the S&P 500?

When considering the likelihood of Berkshire Hathaway's stock outperforming the S&P 500, it's essential to analyze the company's principal stock holdings and key economic metrics, and then compare these with the benchmark index.

The six largest stock holdings in Berkshire's portfolio have an average forward price-to-earnings (P/E) ratio of 18.3 and anticipated earnings growth of 12.4% by 2025 (see table below).

Data source: Yahoo! Finance.

In contrast, the S&P 500 index is trading at a higher forward P/E ratio of 21.1, with an expected average earnings growth rate of 14.2% for the same period, according to FactSet analysts.

Although Berkshire Hathaway's core stock holdings are relatively more affordable, they are projected to have a marginally lower earnings growth rate.

Turning to Berkshire Hathaway stock itself, the company's shares are trading at a forward P/E ratio of 18.8 and are predicted to have earnings growth of 2.4% for the following year.

This significantly lower earnings growth rate suggests that Berkshire Hathaway's stock may not be well positioned to outperform the S&P 500 in the short term.

Cut from a different cloth

Still, a deeper analysis is ultimately required to answer the original question, because Berkshire Hathaway isn't a typical stock.

Buffett and his team have amassed a diverse portfolio of assets, including stocks, bonds, businesses, and a substantial cash reserve. This multifaceted approach sets it apart from most other companies.

What does this all mean in practical terms? Due to its diverse asset portfolio, Wall Street regards Berkshire Hathaway as an exceptional hedge against broad market downturns.

Unlike the S&P 500, which lacks built-in downside protection, Berkshire Hathaway's strategic composition provides a safety net during turbulent times.

Uncertainty looms

Now, let's explore why this distinction matters. The S&P 500's recent bull market surge owes much to the enthusiasm surrounding artificial intelligence (AI). Notably, Nvidia (NASDAQ: NVDA) -- the chipmaker at the forefront of the AI revolution -- holds the second-largest weight within the S&P 500. Consistently surpassing Wall Street's earnings expectations, Nvidia has become a linchpin for the index's performance lately.

However, here's the crux: If Nvidia encounters any obstacles, ripple effects could reverberate throughout the entire U.S. stock market. In contrast, Berkshire Hathaway maintains limited exposure to this AI-centric theme. Its substantial focus lies in sectors such as finance, energy, and consumer goods, shielding it to a degree from the hype surrounding AI.

Although Apple is Berkshire Hathaway's largest holding by a country mile, the tech giant doesn't rely on AI to fuel sales. Instead, Apple leverages its loyal customer base to drive sales of its iconic iPhone. Berkshire Hathaway, in turn, isn't overly reliant on AI to drive its share-price performance, counter to the broader market.

All roads lead to Nvidia

Berkshire Hathaway's ability to outperform the S&P 500 in the short term hinges on Nvidia's trajectory. Should Nvidia continue to exceed Wall Street's estimates by a wide margin, Buffett's conglomerate is unlikely to best the S&P 500 over the next 18 months.

However, a more profound concern looms: The S&P 500 appears markedly overvalued based on its cyclically adjusted price-to-earnings ratio. Furthermore, its bull run appears overly reliant on a single stock.

Perhaps most concerning is that Nvidia's shares are trading at over 42 times forward earnings. This premium valuation may be warranted, but it also suggests that a fair amount of the chipmaker's near-term upside is already accounted for, curtailing its power to drive the S&P 500 much higher.

A favorable scenario for Berkshire Hathaway

If investors balk at paying this hefty premium for Nvidia, Berkshire Hathaway should deliver superior results relative to the benchmark index over the next 18 months.

In other words, Nvidia stock may lose momentum as investors search for more attractive growth vehicles. This dynamic that favors companies like Berkshire Hathaway -- namely, ones that aren't entirely dependent on AI to create shareholder value.

Berkshire Hathaway, despite its unfavorable econometrics relative to the S&P 500, could thus deliver strong returns for shareholders over the remainder of 2024 and the whole of 2025 if this scenario plays out.

That's a testament to Buffett's slow-and-steady approach to value creation, which has consistently beaten the broader markets over the past seven decades and counting. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Can Berkshire Hathaway stock keep outpacing the S&P 500? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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George Budwell has positions in Apple. Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Bank of America, Berkshire Hathaway, Chevron, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Occidental Petroleum. The Motley Fool Australia has recommended Apple, Berkshire Hathaway, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

If you invested $10,000 in Tesla's (NASDAQ: TSLA) public debut back in June of 2010, you'd be sitting on a cool $1.94 million today. By comparison, the same amount invested in an index fund would have yielded a far more modest total return on capital ranging from $30,000 to $42,000, depending on which benchmark the fund was designed to track.   

As a result of this jaw-dropping performance over the past 12 years, Tesla has earned an exceptionally loyal following from its shareholders. Because of this, the electric car and renewable energy giant has been one of the few tech-heavy outfits to generate positive returns for investors over the past 12 months.

Thanks to a flurry of headwinds such as rising interest rates, soaring inflation, supply chain woes, and geopolitical turmoil, tech giants Amazon.com, Inc.(NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT) have lost 27.9% and 17.7% of their value, respectively, since September of 2021. Meanwhile, Tesla, which is largely subject to these exact same macroeconomic pressures, has netted shareholders a respectable 22% gain over this same period.  

Can Tesla's stock continue to defy the broader market? Let's take a look at both sides of the argument to find out.

Tesla's value proposition: A Wall Street battleground

If you browse the surfeit of analyst research reports on Tesla stock, you'll definitely walk away with the impression that Wall Street is divided on the company's outlook.

On the bear side of the ledger, for instance, Tesla's fair-value estimate of $255 per share, per Morningstar, reflects the uncertainty inherent in the growth prospects of the electric vehicle market at large, along with the company's continued ability to maintain an elite brand cachet in a space that is widely expected to attract multiple new competitors in the years to come. This lowball valuation also doesn't assign much in the way of net present value for Tesla's renewable energy business or its growing aspirations in the field of robotics. 

On the bull side, Tesla's 12-month forward-looking price target of $374 per share, from the research firm Argus, is steeped in the idea that the company will likely continue to dominate the emerging electric vehicle market for the remainder of the decade, successfully diversifying into other high-growth areas, such as robotics, along the way. 

This belief is founded on the fact that Tesla currently plows an eye-catching 19% of gross profits into research and development, which is one of the highest spends on R&D (as a function of gross profits) within its peer group. bulls, in short, appear confident in Tesla's ability to maintain a competitive edge, thanks to this elevated level of investment in R&D. 

Is this growth stock immune to recessionary pressures?

Now, Tesla's stock hasn't completely escaped the ravages of the 2022 bear market. The company's shares are currently down by a little over 12% year to date. That said, Tesla stock has performed admirably in 2022 overall.

What's important to understand is that this unrelenting bear market has taken a hatchet to nearly every tech-oriented stock with a premium valuation in 2022. Tesla's shares, though, have largely evaded this marketwide pullback across this particular asset class -- despite the company's shares trading at over 51 times 2023 estimated earnings right now. Underscoring this point, the electric vehicle giant's shares have outperformed approximately two-thirds of its large-cap peers in consumer cyclicals this year.  

What's the secret to Tesla's resilience in the middle of a raging bear market? Put simply, Tesla's loyal shareholder base, enormous long-term opportunities in electric vehicles, renewable sources of energy, and robotics aspirations have kept its stock safe from the worst of the 2022 bear market.

That's an intriguing sign for bulls. The long and short of it is that even this dour market isn't buying the bear view that Tesla's competitive edge will gradually evaporate or that it will fail to innovate in ancillary markets such as renewable energy and/or robotics. 

So if you're looking for a stock that can shrug off the market's laser-like focus on a possible recession, Tesla ought to be at the top of your list. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Tesla stock recession-proof? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Microsoft, and Tesla. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.