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

November was a tough month for Nvidia (NASDAQ: NVDA) investors. Despite reporting another blowout quarter on November 19th, the artificial intelligence (AI) juggernaut's stock fell 12.6% from the closing bell on Oct. 31 through the end of trading on Nov. 28.

November was marked by growing fear of an AI bubble with Nvidia at its very heart. While Nvidia itself is making incredible amounts of money selling picks and shovels to AI gold miners, investors are wondering just how much gold there really is and if it's enough to justify buying Nvidia's extremely expensive equipment -- at least at current levels.

While that concern has been on the mind of shareholders for some time, it peaked this month after Alphabet's Google released its latest AI model, Gemini 3. The large language model (LLM) was widely received as an improvement on the latest models from both OpenAI and Anthropic, but critically, the model was trained with Google's own chips, not Nvidia's.

Google's Gemini 3 raises questions about Nvidia's AI chip dominance

These chips -- called TPUs -- are specifically designed and optimized for the kinds of operations that Google uses to train its LLMs, making them both cheaper to produce and cheaper to run. That directly challenges the primary narrative driving Nvidia's success, that its chips are so much more advanced than the competition that it is worth paying a hefty premium for them.

And while it is still true that Nvidia's GPUs are far more powerful and flexible than Google's TPUs, given Gemini 3 is so capable, it's reasonable to wonder why Google -- or any of the other massive hyperscalers with the means to develop their own chips -- wouldn't move toward relying primarily on their own chips.

Record Q3 earnings couldn't stop the November sell-off

Despite this fear, however, Nvidia's Q3 earnings showed no signs that its orders are slowing down -- quite the opposite. It once again delivered massive top- and bottom-line growth, both year-over-year and quarter over quarter, with gross margins that one would expect from a Software as a Service (SaaS) company, not a chipmaker. 

Nvidia stock has regained its footing, rising roughly 4.3% so far in December. While peak fear seems to have subsided, I think investors should still be cautious. It is hard to argue with the eye-popping numbers Nvidia is delivering, but I do question how long its place at the center of the AI boom -- and the AI boom itself -- can continue.

There has been limited evidence of AI's impact so far in the real economy, and while there is certainly a lot of promise in the technology, there comes a point where that won't be enough for shareholders to stomach the hundreds of billions being invested.

Nvidia's valuation is entirely built on its growth trajectory continuing apace. In the near term, there are no real signs that will falter. Long term, however, I have my doubts.

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

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Johnny Rice 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 Alphabet and Nvidia. The Motley Fool Australia has recommended Alphabet 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 much of tech saw red in November, it was a strong month for Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), with shares of the Google parent rising 13.9% from the closing bell on Oct. 31 to the end of November's trading. The S&P 500 ticked up 0.1% over the same period, though it had dropped as much as 4.4% mid-month, while the tech-heavy Nasdaq Composite finished down 1.5%, having fallen as much as 6.9%. 

Fears of an artificial intelligence (AI) bubble weighed on much of the market, but Alphabet was able to shrug them off because, in large part, the company helped ignite this latest iteration of AI bubble talk in the first place.

Gemini 3 proves Google can compete without Nvidia's chips

Google's release of Gemini 3, its latest AI model, directly challenged Nvidia and OpenAI's place at the heart of the AI boom. Gemini 3 was not only received as a significant improvement on the latest models from its competitors, but critically, it was trained not with Nvidia's chips, but Google's.

These chips -- called TPUs -- are specifically designed and optimized for the kinds of operations that Google uses to train its models, making them both cheaper to produce and cheaper to run. This was a big moment for the industry, which had been largely operating under the assumption that in order to produce the best AI models, you needed Nvidia's latest GPUs. 

Gemini 3's obvious quality is a wake-up call for Nvidia and other semiconductor companies. If Google continues down this path and other hyperscalers follow, Nvidia's pricing power could be in danger.

It's also a major win for Alphabet, validating Google's long-term bet on custom silicon.

Google must renegotiate its search contracts every year

December hasn't been as kind to Alphabet shares, which are down slightly in the first days of the month. On Friday, a judge ordered Google to limit its default search contracts to a maximum of one year as part of an earlier ruling that the company had built a search and advertising monopoly. The company must now renegotiate its search contracts each year, including a critical deal with Apple, which makes it the go-to iPhone search engine.

I think that Alphabet is one of the best picks among big tech. If AI delivers on its promise, Alphabet will reap the rewards. If it doesn't, Alphabet's stock will undoubtedly get hit, but its core business will remain incredibly strong, and shares will recover.

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

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Johnny Rice 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 Alphabet, Apple, and Nvidia. The Motley Fool Australia has recommended Alphabet, 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.

Nvidia (NASDAQ: NVDA) stands at the heart of the artificial intelligence (AI) boom. The company's powerful AI-enabling graphics processing units (GPUs) are essential for the incredible AI models reshaping business and society. While competitors are racing to close the gap, Nvidia's combination of cutting-edge hardware and indispensable CUDA platform will continue to give it a lasting edge.

AI data center demand is driving Nvidia's growth

Companies across big tech are spending massive amounts upgrading existing data centers and building new ones to keep pace amid an AI arms race. The scale of the spending is mind-boggling.

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Just four companies -- Microsoft, Meta Platforms, Amazon, and Alphabet -- plan to spend well over $300 billion in capital expenditures this year alone. That's more than the GDP of 140 countries. It's also well over the inflation-adjusted $280 billion the U.S. government spent over 13 years to send Americans to the moon.

Now, Nvidia is obviously not the sole beneficiary here, but it is the biggest. A significant chunk of that $300 billion will go toward purchasing Nvidia's uber-powerful AI chips. To be sure, a ton of them are needed to power these compute-hungry AI models running on servers in data centers the size of 70 football fields, like the one Meta is building in Louisiana. And they aren't cheap.

Wall Street expects Nvidia's top line this year to come in just shy of $200 billion, a 54% increase from last year.

Nvidia's rivals are hot on the trail, but CUDA is still a major moat

Although Nvidia's technology continues to be well ahead of the competition, the company's rivals, especially Advanced Micro Devices, are gaining ground. It's unclear how long Nvidia can stay meaningfully ahead from a purely technical perspective. I do think it will be years at least, however. Nvidia has some major advantages: It can afford to outspend anyone in the field, and likely even more importantly, it continues to attract the best engineering talent.

Hardware specifications are one thing, but the more enduring moat actually comes on the software side. Nvidia's CUDA platform is a foundational layer that programmers build on top of. CUDA serves as a backbone on which most of today's AI architecture is built. Many higher-level AI tools and platforms are designed to run specifically on CUDA.

This creates a significant switching cost for customers. Moving to a rival chip isn't as simple as swapping hardware -- a customer needs to retrain its engineers or hire entirely new ones with different expertise, and overhaul much of their software and workflows. In practice, the time and expense required make switching a non-starter for most organizations. As a result, CUDA effectively "locks in" Nvidia's customers within its ecosystem and allows the company to command premium prices.

Nvidia's competitors are definitely trying to unseat CUDA as the industry standard, but that's a difficult task. CUDA is too deeply ingrained in the industry. Perhaps a more disruptive threat could come from regulators who see the CUDA lock-in as a violation of antitrust laws, but despite a Department of Justice probe, it's unclear if this has any serious traction from U.S. regulators.

It's not an easy path forward, but Nvidia is capable

Nvidia has proven its ability to innovate and maintain its edge. Despite fierce competition, there are few companies in my book with the vision that Nvidia has demonstrated, and I believe this, in combination with its technological prowess and CUDA lock-in, will allow Nvidia to continue to succeed. While the company's stock is far from cheap -- it currently trades around 50 times earnings -- I think its continued growth justifies the premium.

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. 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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Johnny Rice 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 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.

The last few months have been particularly stressful for many investors. April saw one of the largest market drops in years, with the S&P 500 falling more than 10% in two days. While the market has recovered, many are looking for an investment that can bring stability and peace of mind.

Over the course of the past few years, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has amassed the largest pile of cash and cash equivalents in its storied history -- a reserve that could help it weather a major economic storm, even coming out ahead. The company certainly has a great track record of doing so in the past.

So, with all the uncertainty, is Berkshire Hathaway the smartest investment you can make today?

A major change is coming for Berkshire

Of course, the elephant in the room is the fact that Warren Buffett just announced he will step down as CEO. He has been the inimitable leader of the company for the past 60 years. So his departure will no doubt have an effect on the company.

I believe, however, its effect will be much less than some investors fear. In fact, I think it will be mostly negligible. That's not to take away from the genius of Buffett but rather to acknowledge that he and the rest of Berkshire's leadership have been anticipating and preparing for this very moment for years.

Buffett has taken great pains to make the transition as smooth as possible and will remain the company's executive chairman, providing guidance and advice to the new CEO, Greg Abel, when he needs it. More importantly, however, is that despite what his nickname implies, the "Oracle of Omaha" isn't blessed with supernatural abilities.

Instead, his success comes from a consistent and disciplined investing approach that he refined over many years alongside his longtime partner Charlie Munger. And thankfully, their ethos has been infused into the very fabric of Berkshire. I believe Abel and the rest of the senior leadership will be deft managers who carry the company's torch forward.

Lessons of the past

In the aftermath of the 2008 financial crisis, Buffett made several key investments that earned Berkshire massive returns. In just a few years, Berkshire had profited by several billion dollars off of the $5 billion Buffett invested in Goldman Sachs. In six years, Buffett's $5 billion in convertible notes he received from his Bank of America investment netted an on-paper profit of $12 billion (Berkshire held on to the shares).

Berkshire's cash reserves at the time -- much smaller than today's -- freed the company to be proactive when many companies were fighting to survive. I want to be clear; I'm not saying I think something akin to 2008 is coming anytime soon, but having hundreds of billions sitting on the sidelines means that when opportunities arise, Berkshire will be ready, even and especially if it's during a time of crisis.

A cash-rich business

Aside from the security of its cash reserves, Berkshire's core operations make it resilient during an economic crisis. While the company's investments in companies like Apple and Coca-Cola are where most investors focus, its core businesses are equally important. The companies' diversified businesses deliver consistent cash flow, and many operate in areas that tend to be somewhat "recession-proof."

Its insurance segment, the largest of all of its business arms, is a good example. Insurance is often mandated by law and is not a discretionary expense that consumers can suddenly cut. That being said, it's not immune to the effects of a downturn. Growth could certainly be slowed as consumers make fewer new purchases that require policies.

Admittedly, insurance also faces the threat of climate change. As natural disasters become more frequent and more severe, Berkshire and other insurers could see their margins pressured as they pay out more claims.

This was a major factor in why Berkshire reported a more than 60% decline in net income from the first quarter of 2024 to the first quarter of 2025. The California wildfires and Hurricane Helene and Hurricane Milton had a major impact on the company's bottom line.

While that 60% decline looks like a massive red flag, it will normalize; Berkshire's net income should be back on track in the next few quarters. And in spite of these events, the company's core insurance business, GEICO, managed to grow its net income from $1.9 billion to $2.2 billion during that same period, and Berkshire's overall free cash flow (FCF) was still positive.

Berkshire is a smart move

For investors looking for some sanity in the recent chaos, I think Berkshire Hathaway is one of the smartest investments you can make today, even as Warren Buffett hands the reins to Greg Abel. The company's cash position -- both its reserves and its healthy cash flows from a diversified set of businesses -- means it will not only survive but thrive in a major economic downturn. Berkshire's cash and culture make it a smart choice, one that will help you sleep at night.

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

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Bank of America is an advertising partner of Motley Fool Money. Johnny Rice 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 Apple, Bank of America, Berkshire Hathaway, and Goldman Sachs Group. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. 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.

Shares of Tesla (NASDAQ: TSLA) rebounded on Wednesday. The electric vehicle (EV) stock closed 22.69% higher. The bounce comes as the S&P 500 and Nasdaq Composite were green even as more retaliatory tariffs on the U.S. were announced.

A Wall Street firm added Tesla to its "best ideas" list despite recent troubles, claiming the stock sell-off is overdone.

Benchmark sees opportunity amid challenges

Benchmark analyst Mickey Legg released a bullish research note on Wednesday, adding Tesla to the firm's "best ideas" list. The analyst acknowledged the stock's recent struggles amid declining sales but said he believes concerns "are overblown considering the near-term issues impacting the company and the scope of opportunities around the corner."

Legg did lower his price target to $350 from $475, but that still represents a large upside from the stock's current price around $272. Benchmark maintained a buy rating on the stock.

Future catalysts

The analyst's optimism centers on Tesla's anticipated product launches that could reverse the company's recent sales decline. "Our focus is on the release of a new TSLA model in [the 2025 second quarter], which in our view could turn around the recent decline in vehicle sales," Legg wrote. He also thinks that Tesla's robotaxi service, scheduled to launch this summer in Austin, Texas, could be a significant catalyst.

The company is promising the release of a personal robot named Optimus. Legg describes it as a possible game changer that transforms the company from a vehicle manufacturer into a broad automation provider. This aligns with CEO Elon Musk's recent statement that Tesla plans to build 5,000 Optimus robots this year.

While these plans could indeed be a game changer, their success is far from guaranteed. Neither is the timeline of their release. Musk has a history of big promises that fail to materialize. It's been nearly a decade since the enigmatic CEO chief said that his cars would soon be fully autonomous, but he still has yet to deliver on that core promise. I would avoid Tesla stock for the time being.

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

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Johnny Rice 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 Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Shares of Tesla (NASDAQ: TSLA) traded lower on Tuesday, with the company's stock losing 8.39% as of market close. The drop comes as the S&P 500 lost 0.47%, and the Nasdaq Composite lost 1.35%.

The electric vehicle (EV) pioneer is seeing its sales in Europe crumble according to a report by Bloomberg released Tuesday.

It's not the market, it's Tesla

New sales of Tesla vehicles throughout Europe hit their lowest point in years, despite overall sales of EVs soaring in Europe in the same period. The company's January sales were down 45% year over year while EV sales industrywide were up 37%. The 9,945 new cars Tesla registered are a far cry from last year's 18,161.

This also marks the first time that Tesla sold fewer cars in the U.K. than its Chinese rival BYD.

The Musk effect

Some of the drop-off can be explained by the company's manufacturing changeover: It is shifting operations to produce more of its popular Model Y SUVs. However, the effect of the company's increasingly polarising CEO, Elon Musk, has likely helped drive the decline.

The Tesla chief has been vocally supportive of Germany's far-right AfD party, even making virtual appearances at campaign events. In the U.K., Musk has been highly critical of Prime Minister Keir Starmer and the U.K. government. In early June he created a poll on X asking whether "America should liberate the people of Britain from their tyrannical government."

This behavior has turned off many Europeans and may be playing a significant role in Tesla's drop in sales, although it's impossible to know just how much. Recent polls from the U.K. show Musk's unfavorability rating — steadily rising over the last year — moving sharply upward in January. In Germany, the vast majority of respondents — 73% — found Musk's involvement in its politics unacceptable.

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

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Johnny Rice 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 Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BYD Company. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It's no secret that Nvidia (NASDAQ: NVDA) is one of the hottest artificial intelligence (AI) stocks in the market. The chip-making juggernaut just reported an incredible Q3, beating Wall Street's sky-high expectations. So why was the stock trading lower on Thursday when the market opened?

Although it might seem to defy logic, it's not an uncommon phenomenon. Let's take a look at why it happens and see if the past might shed some light on what happens next. First, let's take a look at Nvidia's quarter.

Even for Nvidia, this was a strong quarter

Few companies have as much riding on their shoulders as Nvidia does in the current market. The company's performance is seen as a bellwether for the market as a whole. It's a good thing, then, that Nvidia delivered this quarter.

Nvidia's data center segment continues to be the driving force behind its success, though its gaming arm is still showing solid growth. Demand for its Superchips and related hardware is at a fever pitch. As CEO Jensen Huang puts it, "The age of AI is in full steam, propelling a global shift to Nvidia computing."

The big news is the confirmation that Blackwell, the newest iteration of its Superchips, is on schedule and will be rolled out without a hitch. During the earnings call, Huang made clear that the first chips are already "in the hands of all of [Nvidia's] major partners" and will soon be shipped to end users -- companies like Meta and Microsoft operate massive AI data centers.

According to Huang, demand for Blackwell is "staggering"; Nvidia has so many orders it is struggling to keep pace. Despite this, demand for its current Hopper chips remains strong, and Huang indicated he believed orders would continue well into next year.

Nvidia's reach is global

Beyond the numbers, Nvidia highlighted some important developments that show the growing demand beyond U.S. commercial clients. Denmark just launched its first AI supercomputer driven by Nvidia's Hopper chips. This is an important client base for Nvidia that is often overshadowed by its success with big tech cloud operators. "Sovereign AI" -- world governments running their own computers -- could be a massive industry as nations around the world enter an information arms race.

Nvidia is also finding commercial success worldwide, with new private companies in India, Japan, and Indonesia building Nvidia-powered AI data centers.

Nvidia's stock dips

In the initial hours after the market opened on Thursday, shares of Nvidia slipped, briefly reaching $141 after closing at nearly $146 the day before. Why would this happen after such a strong quarter? This is pretty common if Wall Street's expectations exceed the company's performance, even if that performance is solid. That's not what happened here. Nvidia beat estimates handily, delivering revenues of $35.1 billion and earnings per share (EPS) of $0.81. Consensus targets were $33.2 billion and $0.75, respectively.

Here's the thing: market sentiment can exceed even Wall Street estimates. With all the hype around Nvidia and talk of "insane" demand for its new chips, it's becoming increasingly difficult for the company to live up to investors' expectations no matter what numbers it delivers. It's the curse of success. Nvidia has continuously beat estimates, so now, even when it does, it might not be by enough.

Certain research has shown that investors tend to put too much faith in past earnings. Over time, this leads to a stock being overbought in the lead-up to an earnings release and a short-term dip after the release. What Nvidia is experiencing is very normal.

Don't panic. The long-term potential is where we want to place most of our focus here and this report shows it is still firing on all cylinders. Given other stocks that have been in Nvidia's shoes and Nvidia itself last quarter -- shares dipped 18% in the days after earnings -- history tells us that the stock will be just fine.

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

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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. Johnny Rice 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 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 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.

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This week marks a big moment for tech investors as perhaps the most anticipated earnings of the year will be released: Nvidia (NASDAQ: NVDA) will announce its Q3 numbers on Wednesday, November 20.

The artificial intelligence (AI) titan powering a market boom has a lot of questions to answer. How is it dealing with the recent issues at one of its key suppliers? Is the release of its newest Blackwell chip going according to plan?

We'll learn more on Wednesday, but there are plenty of reasons to buy Nvidia's stock ahead of time. While there's always a chance something disappointing could be revealed, Nvidia currently appears to be in too strong a position to meaningfully change its trajectory over the long term. Here are three reasons why Nvidia's stock is a buy today.

1. Blackwell looks big

We'll learn more about Blackwell's release, but all signs point to a successful rollout of Nvidia's newest iteration chips. There was a hiccup earlier this year when reports of fabrication issues spooked investors. It's now clear that Nvidia handled the issue swiftly, and what could have been a significant delay was only a month or two. Blackwell is set to be delivered to customers shortly.

The chips are a significant upgrade to the already uber-powerful Hopper chips, which still appear to be selling extremely well despite the imminent release of their successors. Elon Musk and his xAI team bought 100,000 Hopper chips just a few months ago and are in the process of purchasing another 50,000.

It's a great position to be in when the demand for current and future iterations is at a fever pitch. It's been reported that Nvidia is sold out of Blackwell for at least 12 months following its release.

Nvidia CEO Jensen Huang described the demand as "insane." The company is partnering with Foxconn in order to meet that demand, opening a new Blackwell-specific fabrication plant in Mexico.

2. Big Tech is still spending huge amounts

Taking a look at recent big-tech earnings calls from Nvidia's top customers, it's clear the money is still flowing. Tech giants like Microsoft, Meta, and Alphabet are spending billions building data centres that can handle the demands of AI. The capital expenditure (capex) of these companies rose sharply over the last year, with much of it flowing into Nvidia's coffers. The trend will likely continue.

Meta aims to significantly boost its 2025 capital expenditure, with CEO Mark Zuckerberg emphasizing the potential for a substantial return on investment (ROI) from AI advancements and even suggesting that capex needs to grow further. Alphabet spent $13 billion last quarter building data centres and expects the same in Q4, putting it on track to top $50 billion in capex for the year.

3. Nvidia has massive free cash flow

Free cash flow (FCF) is a critical measure of a company's financial health, and Nvidia has a lot of it. Look at the explosion in FCF over the last few years compared to its rival AMD.

Nvidia Free Cash Flow data by YCharts.

That is a major divergence. FCF can be used for all sorts of things that either boost a company's ability to do business or enrich its shareholders, often both. It gives Nvidia immense resources to respond quickly and effectively to the market and critically defend its market dominance. As AMD and others try to keep pace, Nvidia can deploy this capital to outspend its competition significantly on, say, more R&D or poaching talent.

At the same time, FCF can be used to repurchase shares, and that's exactly what Nvidia has been doing. Over the course of the first half of the year, it repurchased $15.1 billion in stock, and last quarter, announced the board had approved $50 billion in additional stock buybacks.

On Wednesday, we'll see just how much of the $50 billion they've used. It's clear, however, that the company is committed to doing its part to reward its shareholders.

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

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Johnny Rice has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Alphabet, 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.

The streaming wars have been raging for years now, with some of the world's biggest companies fighting for eyeballs. Amazon, Apple, and others are duking it out, spending billions pumping out content in an attempt to capture market share.

The war is expensive. Although direct financial and viewership data is hard to pin down -- many companies fold their TV divisions into larger segments -- it's clear that the economics aren't working for many.

Few companies have a war chest the size of Apple, but the iPhone maker is reportedly reworking its strategy, trying hard to rein in its massive spending. The company spent at least $20 billion in the five years it has made original content -- that doesn't include the billions it spent licensing content as well, spending a whopping $500 million on movies from just three directors. Despite these numbers, it's managed to capture just 0.2% of TV viewing in the United States.

But it's a different story for the streaming king, Netflix (NASDAQ: NFLX) -- the company that launched a thousand streamers. Netflix pioneered the streaming category, and everybody else is playing catch-up. Here's a closer look at its enduring success.

Netflix is raking in cash and beating expectations

The streaming giant released its third-quarter earnings results on Thursday, 17 October and Wall Street was impressed. It exceeded consensus estimates for both revenue and earnings per share (EPS). The market reacted to the news, and shares are up about 10% as of this writing.

While it's no longer the only streamer turning a profit, it's the only one that has reliably for years and on the scale it is. Walt Disney reported an operating income of $47 million for Q3 2024 for its streaming services, which include Disney+, Hulu, and ESPN+. Netflix's Q3 operating income? Nearly $3 billion.

Take a look at the company's steady rise in operating income over the last few years in the chart below.

NFLX Operating Income (TTM) data by YCharts

Tiered subscriptions are changing the game

Many of us remember the promise of streaming -- premium content at a fraction of the cost of cable with no ads. Unfortunately for consumers, but fortunately for investors, that promise has been broken.

Hulu helped pioneer the 'ad-supported' model, in which users choose between a low-cost tier with ads and a premium, ad-free tier. Netflix introduced its ad-supported tier in late 2022, and it was an immediate boon for the company's bottom line, as you can see in the previous chart.

An ad-supported tier allows for more users to join who would otherwise feel the service is too expensive, and the numbers back this up: Ad-supported subscriptions were up 35% last quarter. On the income side, any potential loss from offering a cheaper tier is largely compensated for by ad revenue.

Netflix is still delivering hits

While many streamers are struggling to deliver shows that take off, Netflix is not. The company has had a string of hits recently with shows like Nobody Wants This and House of Ninjas -- a show in Japanese that delivered a larger United States audience than Apple's $250 million Masters of Air.

The second season of the company's smash hit Squid Game is set to release soon, as well as several other high-performing IPs. Netflix seems to be firing on all cylinders at the moment.

Incredibly, despite what might appear to be a market share that is approaching saturation, Netflix accounts for just 8.4% of TV watching in the US. There is a lot of room to run here.

Now, the stock is trading at a pretty high premium -- its price-to-earnings ratio (P/E) is currently sitting just shy of 40 -- but I think its prospects easily justify it. Netflix is in the driver's seat at the moment and has a huge amount of space to expand and plenty of wiggle room in pricing that can continue to boost sales. While the war is far from over, Netflix certainly has the upper hand.

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

The post Netflix's latest earnings call sent its stock surging. Should you buy now? 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, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Johnny Rice 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, Apple, Netflix, and Walt Disney. The Motley Fool Australia has recommended Amazon, Apple, Netflix, and Walt Disney. 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.

It's no secret that Nvidia (NASDAQ: NVDA) is dominating the artificial intelligence (AI) chip market, especially the massive data center segment -- think server farms built by companies like Amazon and Alphabet. Last quarter, the company brought in $26.5 billion in revenue from the lucrative segment. That's 10 times more than its biggest competitor, AMD, managed, but Nvidia isn't just selling more, it's doing so at a lower cost. In the same period, the company's net income here was a whopping 25 times that of AMD's.

Media attention has been focused almost entirely on this segment. It makes perfect sense; those numbers are insane. Make no mistake, data centers are the beating heart of Nvidia's explosive growth and that's not liable to change. But an exciting opportunity in AI exists outside of these colossal server farms. Your personal computer could play a crucial role in the near future.

That's why Nvidia is hosting its RTX AI PC Day this Oct. 19 and 20. The event will showcase how the company is incorporating AI and machine learning capabilities into its consumer-facing GPUs and the future it envisions for AI-powered PCs. What could this mean for investors?

Pushing AI to the edge can save time and money

In tech, the last two decades have been defined by the cloud. Advances in internet bandwidth allowed much of the actual work of computation and storage to move from your local device to sprawling server farms hidden away in mostly rural areas. Out of sight, out of mind, as they say. AI is, by and large, no different. ChatGPT doesn't run on your computer; it's likely running on Microsoft servers thousands of miles away. You're using your computer simply to communicate with it.

However, that is beginning to change. In some cases, computing is moving back to the "edge" as the techies call it. In other words, more and more, a significant portion of computing will again happen locally on your device. Some believe this could be a big trend in AI. But why, you ask? Great question.

Some AI applications are just too intensive to run anywhere but in a data center equipped with thousands of, say, Nvidia's H100s. At $25,000 a pop, the cost is enormous. That's why these data centers are built by companies that can invest billions of dollars to build them. However, not all AI applications need that much power. Some models, specific tools, or other limited applications of AI could run locally with a powerful enough GPU. But just because they could, does it mean they should? What advantages does edge computing have here?

First, where edge computing lacks power, it makes up for it in speed. Cloud computing introduces latency into the equation -- a delay -- that crunching the numbers locally doesn't. Those milliseconds could make all the difference for some applications of the technology. Second, given the cost of building and operating large-scale data centers, using them is anything but cheap. Customers who opt for an edge approach may pay more upfront, but it could easily be the cheaper option over time. Another big one? If your internet connection isn't guaranteed or limited, you don't want to have to rely on the cloud.

AI PCs will be used for everything from enhancing video game graphics and expanding what's possible for content creation to bringing a personal AI assistant to your car.

AI PCs could be a big market for Nvidia

This could be a major leap for the whole PC industry. The CEO of Qualcomm called it "as significant as Windows 95." No one wants to be left behind here and that means Nvidia has stiff competition from a host of other chipmakers all vying for a piece of the pie that research firm Canalys expects to grow at a 44% compound annual growth rate for the next four years. The firm believes that more than 200 million AI PCs will ship in 2028.

Given the competition, it may be unlikely that Nvidia will capture as much of this market as it has the data center market. Given the scale, however, it doesn't need to. A modest share of this market will still boost its bottom line significantly.

Nvidia's event will help raise the profile of AI PCs and could impact the stock price, but I wouldn't hold my breath for anything significant. The event won't move the needle in and of itself. What's important is what it represents: another massive opportunity for a company firing on all cylinders.

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. Johnny Rice 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 Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, and Qualcomm. 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, 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 roller coaster doesn't seem to be stopping as Nvidia (NASDAQ: NVDA). The centerpiece of the artificial intelligence (AI) boom has also been the main driver of the S&P 500 index's performance since late 2022. This year alone, roughly a quarter of the index's 20% rise can be attributed to the chipmaker.

That's a lot of weight on Nvidia's shoulders. Investors are hyperfocused on its every move, seeing it as a bellwether for the market at large. The good news for investors, then, is that the AI giant is charging full steam ahead. It will face challenges and overcome obstacles, but Nvidia has several catalysts that could boost its bottom line in the not-too-distant future. What will the next year bring for Nvidia?

Demand is still extremely high for its bread and butter

The uber-powerful chips the company designs and sells are the backbone of its success. That's why investors were spooked when the company announced its first real snafu since the AI boom took off. Production issues were discovered in the newest version of its AI chips originally set to begin rolling out in the third quarter. These chips, dubbed Blackwell, are now expected to hit the market a quarter later in Q4. Luckily, this delay is shorter than some feared, and the company assured investors that the delay had been accounted for in its guidance.

Critically, any loss from Blackwell chips in the short term is being compensated for by the still extremely high demand for its current-generation Hopper chips. When Blackwell does begin rolling out, the company expects the demand to be even stronger. As CEO Jensen Huang put it, "The anticipation for Blackwell is incredible."

Now, while Nvidia has generally delivered on its promises in the past, it's a good idea to take a company's promises with a grain of salt. Company brass was a little light on details around the delay, and there is always a chance that things won't go as planned. If more delays are announced, it could spell trouble for Nvidia. Still, I don't see any reason to believe that will happen here or that this will develop into a major problem.

Nvidia makes more than its flagship chips

Nvidia's data center segment, under which its AI chips fall, is by far its most lucrative. I think the chart below puts into perspective just how important the segment is for the company.

NVDA Revenue (TTM) data by YCharts

See that incredible inflection point in 2023? That is almost entirely coming from its data center growth.

Now, its chips are undoubtedly the heart of this, but it's not the only product the company offers in this segment. Nvidia aims to be a full-service provider of data center hardware and software. Nvidia has a platform called Spectrum-X that, although launched as recently as last year, has already seen a big uptick in sales.

The platform is a networking solution that allows customers to keep up with the intensive networking demands of AI computing without abandoning ethernet. Ethernet -- a networking technology -- has been the standard for decades and is used in almost every data center in the world. As Nvidia continues to build ever more powerful chips, existing ethernet networks are struggling to keep up with the flow of data, creating a bottleneck.

This could mean having to retrofit a data center, removing the miles and miles of ethernet cables and associated hardware, and replacing it with faster technology. Remember, these data centers are massive -- we're talking the size of multiple football fields in some cases -- so you can imagine this would be incredibly costly. Spectrum-X allows the bones of these networks to remain, upgrading only critical parts of the network infrastructure. This is a huge cost saver for data centers.

Nvidia leadership was excited by Spectrum-X in the company's latest earnings call. CFO, Colette Kress reported that Nvidia's "Ethernet for AI" -- of which Spectrum-X is a primary part -- revenue "doubled sequentially with hundreds of customers adopting our Ethernet offerings" and that the platform "has broad market support from OEM and ODM partners." The company expects Spectrum to be a multibillion-dollar product line in a year.

Beyond this, Nvidia is rolling out new software to help companies build custom AI solutions and is pushing further into the automotive industry, a segment that could be massive in a few years' time once driverless technology matures. In the short term, however, this will still be a significant revenue source as AI is integrated into car "infotainment" systems. This is already happening, but expect to see more car companies advertise this system in the coming year.

Nvidia is on the right path

Without getting specific about a price target, I think Nvidia will outperform the market over the coming year. Yes, at a price-to-earnings ratio (P/E) of 56.07, it does carry a premium, but this is pretty much at or below where it has been trading since the beginning of 2020. Furthermore, its forward P/E is currently sitting at 34.2, slightly below its average since the AI boom took off. These figures look fine to me considering Nvidia's growth potential.

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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Johnny Rice 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 Nvidia. 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.

Artificial intelligence (AI) leader Nvidia (NASDAQ: NVDA) is set to host its 2024 AI Summit starting Oct. 7. The event will bring together leaders from across the industry to see and hear from some of the foremost minds in AI. It's a chance to catch a peek at the future of this potentially revolutionary technology.

With such a big event upcoming, you might be asking yourself: Should I invest in Nvidia now? History may give us a clue. Let's take a closer look at the company.

Nvidia dominates its rivals

There was a time when Nvidia and its longtime rival, Advanced Micro Devices, were neck and neck in their battle to control the gaming market. By and large, there was parity between both of the company's income statements. That's changed. After AI hit an inflection point in late 2022, Nvidia is dominating AMD, earning more in profits than AMD does in total revenue. Take a look at this chart, which shows just how monumental the recent shift has been.

NVDA Revenue (TTM) data by YCharts.

That's what you get when you control 90% of a market as valuable as AI silicon. The great news for Nvidia is that it doesn't look like the gravy train will stop anytime soon. The messaging from the rest of big tech, the companies that represent most of its business, is that their spending is likely to accelerate in the near future.

This is a race of sorts, and none of the big players can afford to be left behind. As Alphabet's CEO, Sundar Pichai, put it in the company's latest earnings call: "The risk of underinvesting is dramatically greater than the risk of overinvesting for us here." Alphabet expects to spend roughly $50 billion this year in capital expenditures (capex), up from $32 billion the year before -- and it's not alone.

At present, the bulk of this spending is still flowing through Nvidia as AMD, Intel, and others struggle to match the power and efficiency of Nvidia's chips. There is still enormous demand for its current generation, and the company's next generation will likely ship within the next few months. The massive profits Nvidia has enjoyed means it has large amounts to spend on maintaining its edge. Despite already leading the pack, Nvidia outspent AMD in research and development roughly two to one last quarter. 

What history has to say

This will be the third year in a row that Nvidia will host an AI event in this vein. The company began these events in 2022 with a virtual event focused on speech in AI. 2023 was supposed to be the first year of a full-fledged, multi-day AI summit, but the event was moved online for a single day. This year's event will take place in person over three days.

Despite their more modest meeting formats, both of the previous iterations led to a nice bump-up in Nvidia's stock price. In the week that followed 2022's event, shares were up as much as 10%. In 2023, they were up as much as 6.5%. So will this year's conference also lead to a jump in stock price? Maybe.

I know that might be a disappointing answer, but the truth is that we can't know for sure. First of all, two years is a very small sample size from which to draw firm conclusions. Also, even if we had more years to reference, correlation is not causation. Just because two things can be linked -- like an AI summit and a jump in stock price -- doesn't mean one happens because of the other.

But the event is a chance to remember the power that AI holds. Instead of thinking about possible short-term stock movements, focus on the company's long-term prospects. Don't lose sight of the forest for the trees. This is a company at the top of its game, enabling the adoption of a potentially revolutionary technology.

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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Johnny Rice has no position in any of the stocks mentioned. 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 and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: short November 2024 $24 calls on Intel. The Motley Fool Australia has recommended Alphabet 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.

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

The "Oracle of Omaha" didn't get that nickname by accident. In his 60-year career at Berkshire Hathaway, Warren Buffett has had a knack for seeing into the future. At least, it could seem that way, but Buffett doesn't have a crystal ball. Instead, he has a crystal-clear strategy and philosophy that guides every investing decision he's made. It made him a billionaire and it's made a lot of people who have adopted his approach a lot of money over the years.

Buffett believes in disciplined investing and that time in the market beats timing the market. Instead of scouring the market looking for a great deal on a stock, pay more attention to the businesses themselves, and then, "When you find a truly wonderful business, stick with it. Patience pays..."

One factor that makes a business "wonderful" is a fundamental competitive advantage that protects a business from competitors: a moat. As Buffett explained in his 2007 letter to shareholders: "The dynamics of capitalism guarantee that competitors will repeatedly assault any business 'castle' that is earning high returns. Therefore, a formidable barrier ... is essential for sustained success."

Here are two companies that Buffett loves and have significant moats.

1. There is a reason Buffett has stuck around Coca-Cola for so long

If you want to talk about moats, you'd be hard-pressed to find a bigger one that's been maintained for longer than Coca-Cola (NYSE: KO). The beverage giant is one of the most recognized brands in the world. It's so ingrained in our culture that large swaths of the South use it as a generic term for soda.

That brand protects it from upstarts vying for shelf space. It means any company trying to dislodge its hold has to spend ungodly amounts of money to begin to match the sort of recognition it has.

It's not just the brand that's valuable, the company is, too. Coke has grown steadily over the years and continues to gain ground. It is a proven, stable business that consistently finds ways to adapt to consumer demands. I have to note that Coke is priced at a slight premium at the moment compared to its competition. Its forward price-to-earnings ratio (P/E) is about 24. That's above PepsiCo's and Keurig Dr. Pepper's 20 and 18. It's a little higher, but not terrible. I still think it fits neatly in a diverse portfolio as an anchor of stability. Don't expect tech-like returns; expect consistency and a healthy dividend yield that grows year after year.

2. Amazon is an amazing company and Buffett knows it, even if he missed its meteoric rise

Amazon (NASDAQ: AMZN) has a lot of the qualities Buffett likes, but it's also a tech company. Buffett is fond of saying he doesn't invest in what he can't understand and a lot of tech falls under this category. Now, this is often taken to mean he doesn't understand the technology itself and sure, I doubt Buffett understands the intricacies of computer science, but what he is really saying is he doesn't understand the business. He cannot understand intuitively what the business will look like, say, 20 years from now.

In a sense, he's saying he can't accurately assess most tech companies' moats. It makes sense -- technology progresses in leaps and bounds and a company that appears to have a firm hold on a market can get displaced in a drop of a hat or frankly, the whole market can quickly become obsolete.

Buffett has made exceptions -- Berkshire's largest holding is Apple after all -- but this attitude has driven much of the company's decisions for years and it kept him from making the leap into Amazon, despite being a fan of the company. In fact, it wasn't even Buffett who made the original purchase in 2019, it was another manager at Berkshire. He's thankful Berkshire owns shares now, saying at an annual shareholder meeting that he "blew it" by not investing early on.

Amazon isn't your typical tech company. There is an incredible amount of physical infrastructure, real-world resources, and complex logistics that make directly competing with it expensive and nearly impossible. Beyond this, the company has built a brand that people really trust. In fact, it is the most trusted institution in the country. According to a 2023 poll by The Harris Poll and HarrisX, Americans trust Amazon more than the U.S. military or the Supreme Court. How many brands can say that?

Even if Berkshire only got in in 2019, the stock has just about doubled in that time and the future looks no different. It is pushing the bounds in artificial intelligence (AI), rapidly expanding its adtech business, and continuing to gain ground in e-commerce where it already absolutely dominates. I think Amazon is another no-brainer buy.

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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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. Johnny Rice 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, Apple, and Berkshire Hathaway. The Motley Fool Australia has recommended Amazon, Apple, and Berkshire Hathaway. 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 single biggest leap in technology since the internet -- or so say its biggest believers. Its effect on the market has been enormous. Led by the poster child of the AI revolution, Nvidia Corp (NASDAQ: NVDA), AI stocks went on a tear over the last few years that made a lot of people a lot of money.

The last month or so hasn't been so kind; the Nasdaq Composite Index (NASDAQ: .IXIC) is down more than 10% since its peak in early July. The majority of big tech players released their earnings for Q2 2024, and although there was a lot of positive news -- Meta Platforms posted 22% year-over-year revenue growth for the quarter -- investors were somewhat spooked by the larger-than-expected spends the companies are planning to make on AI infrastructure.

This, in combination with broader market fears -- here's hoping the Federal Reserve can nail that "soft landing" -- hit Nvidia hard. Its stock is down over 22% since July 10. But you know what? I think this is great news. It's a buying opportunity for those who still believe in the stock, and I do. With the company set to release its Q2 numbers on Aug. 28, here are two reasons to buy before it does.

1. Big tech doesn't plan to slow its spending soon

During the latest round of earnings calls, CEOs from the big tech players fueling Nvidia's monster returns fielded questions about their companies' expectations for future capital expenditures (capex), specifically those relating to AI. Alphabet, for instance, spent about $32.3 billion in capex in 2023. This year, the company could hit $50 billion. That's a massive increase, and it's not alone. Check out this chart showing the net change in capital expenditures from Alphabet et al. over the past year.

META Capital Expenditures (Quarterly) data by YCharts

If there is an end to massive spending on AI infrastructure, it is some ways off. AI is too big an opportunity, and no company wants to be left behind. As Alphabet CEO Sundar Pichai put it in the earnings call, "The risk of underinvesting is dramatically greater than the risk of overinvesting for us here." Although there is more to AI infrastructure than the chips Nvidia provides, they are arguably the most essential part, and Nvidia is likely to be flooded with cash for some time. Of course, Nvidia must work to maintain its market share, but it is in a strong position to do so.

2. There are signs that AI is delivering real-world value

But can AI deliver the kind of real-world value that justifies its enormous cost? I think the jury is still out, but Meta's recent earnings make me more confident. As I mentioned earlier, Meta posted 22% revenue growth from a year ago and a whopping 73% jump in earnings per share. During its recent earnings call, CEO Mark Zuckerberg attributed this jump in part to AI. The company used AI to improve its content algorithm, which led to more engagement. This translated into more use, which meant more advertising revenue.

Zuckerberg spoke of his plans to have AI craft entire marketing campaigns -- both strategy and the creative assets themselves -- for advertisers. This could open up a whole new revenue stream for the company. The idea is just one example of the powerful, revenue-generating promise of AI. The more evidence of real-world value, the more companies will be willing to continue to spend on AI, and that is good news for Nvidia.

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

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Johnny Rice 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 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.

No company in the last year has captured the attention of the investing world quite like Nvidia Corp (NASDAQ: NVDA). The chipmaker dominated headlines as its stock price more than doubled since January, and with good reason; it's proven itself as one of the most important and central companies in the artificial intelligence (AI) boom — a role that has allowed it to rake in dizzying amounts of cash.

AI, if its evangelists are to be believed, has the power to completely transform the global economy, a technological revolution on par with the internet. It's important to maintain a healthy skepticism in the face of so much optimism. Promises of this scale have been made before and they haven't always turned out well for the investors involved. Still, there is reason to think this isn't a simple hype bubble. The potential is certainly self-evident. The crux is whether these companies can deliver on that promise.

Nvidia CEO Jensen Huang will join Meta Platforms Inc (NASDAQ: META) CEO Mark Zuckerberg on July 29 to discuss the future of AI at a conference dubbed SIGGRAPH 2024. Hopefully, hearing from two leaders at the forefront of AI will shed some light on developments. Whether the event itself will have a material impact on Nvidia's share price is impossible to know, but there's certainly a chance the two would announce some sort of exciting partnership. Regardless, as the event approaches, let's consider three reasons Nvidia is still a buy.

1. Nvidia is raking in mountains of cash, giving it a lot of room to maneuver

Nvidia's revenue growth over the last couple of years has been nothing short of incredible. As the AI gold rush took off, the company was selling proverbial picks to the gold miners. Except these picks cost tens of thousands of dollars. Take a look at the explosion in revenue that happened soon after AI hit the mainstream at the end of 2022.

NVDA Revenue (TTM) data by YCharts

This revenue growth is coming as the company continues to drive down costs and grow its margins. Free cash flow (FCF) is the cash a company has to play with after all expenses are paid and capital expenditures are made, and is a great measure of a company's financial health. Nvidia grew its FCF by nearly 500% in the last three years; it's now sitting just shy of $40 billion. That is a lot of cash it can use to invest in the future, defend its market share, repurchase stock, or any number of things to make the business stronger and its stock more valuable.

2. Nvidia is at the center of a $16.7 trillion market

Nvidia has the cash to help defend its market share, but even if it loses some to competitors like Advanced Micro Devices Inc (NASDAQ: AMD) — and it likely will lose some — the market itself is so big and growing so rapidly that it may not matter. PwC — one of the "big four" accounting firms — believes AI can add $15.7 trillion to the global economy by 2030. Statista.com predicts a compound annual growth rate (CAGR) for the total AI market of 28.5% through 2030. That growth that can propel Nvidia's business for years to come.

3. Nvidia may look expensive, but its price may be more reasonable if we consider future earnings

Nvidia's stock is trading at a hefty premium. The company's price-to-earnings ratio (P/E), one of the most common metrics to value a stock, sits at about 72 today. For context, Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) has a P/E of less than 30. When we look to the future, however, the picture looks a little different. Nvidia's forward P/E sits at 45, a more reasonable valuation, even if it's still on the high end. To me, Nvidia's place at the center of the AI boom and the future earnings potential that provides easily justify a premium.

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

The post 3 reasons to buy Nvidia stock before 29 July appeared first on The Motley Fool Australia.

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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Johnny Rice 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 Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, 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.

Artificial intelligence (AI), which some are hailing as the next technological revolution on par with the internet, is the investing theme of the moment.

The incredible promise of the technology led investors to lift Nvidia (NASDAQ: NVDA) stock to dizzying heights. The semiconductor powerhouse designs and sells the chips that make AI possible, putting it in a unique position in the emerging industry that led to quarter after quarter of incredible revenue growth.

So why did its CEO, Jensen Huang, sell 700,000 shares of its stock last week? Well, in short, I don't know. No one but Huang and his accountant do. What I do know is that there are plenty of reasons that don't involve him losing faith in his company. Although it's tempting to see it as a reason to run for the hills, it's really not.

Investors have to keep things in perspective. Jensen Huang owns more than 800 million shares, worth north of $100 billion, for those counting. The shares he sold last week amount to less than 0.1% of his net worth. Do you think that shows a lack of faith? Huang likely sold these shares for something as boring as paying taxes.

While it's interesting to see what a C-suite is doing with its company's stock, you can't rely on it to make decisions. Instead, always return to evaluating the business as a whole. So, is Nvidia still a good pick?

Nvidia is a cash machine. The question is, can it continue?

Controlling the lion's share of the AI chip market means Nvidia is printing money, growing at an incredible rate. Take a look at this chart showing the amazing growth over the last three years. 

NVDA REVENUE (TTM) DATA BY YCHARTS.

It looks to be continuing as well — at least in the short term. Consensus estimates put the company's revenue at $120.6 billion this year, a nearly 98% jump from last year. That is serious growth for any company, let alone one vying for the title of the biggest company in the world by market cap.

Now, observers have to expect this to cool somewhat, but can the chipmaker still sustain strong growth moving forward? Well, there are some pretty tall hurdles to clear. The most pressing threat comes from ramped-up competition from its old rival, AMD.

This company has set its sights on grabbing some of Nvidia's pie, and although it likely will, it's a matter of how much. Thankfully for Nvidia investors, AMD is currently being outspent almost two to one by Nvidia in research and development (R&D), and it has the resources to keep it this way. I think this will allow Nvidia to stay one or two steps ahead for some time.

Nvidia's future depends on the future of AI as a whole

While plenty of challenges lie ahead for Nvidia, perhaps the biggest is whether AI itself actually delivers on its promise. Despite all the hype, there's still a lot to prove. It wouldn't be the first time a technology failed to deliver to the degree investors hoped.

Think of AI and all the businesses that enable it and benefit from it as a river. Nvidia is somewhere in the middle, upstream from the companies that deliver AI products to the end market. If those companies can't deliver AI products to the market that create immense economic benefit, they can't justify buying the hardware Nvidia produces, at least not at the same rate. In other words, the river dries up. AI has to actually deliver real value to real people — otherwise, Nvidia may have some issues.

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

The post The CEO of Nvidia just sold 700,000 shares of his company's stock. Here's what investors need to know appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices 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.

Competition for the title of most valuable company in the world is heating up. Earlier this week Nvidia (NASDAQ: NVDA), after its monster run over the last few years, leapfrogged Microsoft and Apple to become the largest company in the world by market capitalization (market cap), the total value of all publicly traded shares of a company.

After topping its rivals, Nvidia slid back to third place, but this isn't any reason to fret. It's a tight race and the three are likely to be trading places for some time. The next round of earnings later this summer will be a major catalyst that could move the needle to a more stable place if any of the companies beat their own guidance and Wall Street's expectations -- or fall short.

 No investing theme is more popular right now than artificial intelligence (AI) and Nvidia is its poster child. Investors are salivating at the incredible returns the company is delivering consistently quarter after quarter -- its revenue last quarter was up 260% year over year -- with the promise of continued growth into the future. Its rapid ascent since AI captured the public's attention is one for the record books. But what should investors pay attention to long term?

Understand what makes Nvidia special

Nvidia holds a unique position in the market. The company was so ahead of the curve that it was able to capture roughly 80% of the AI chipmaking business.

Of course, like most wildly successful companies, it was a matter of a little bit of luck and a lot of foresight. CEO Jensen Huang made a bet. Nvidia made chips called graphics processing units (GPUs) that were, for a large chunk of the company's history, accessories to the all-powerful central processing unit (CPU) that made Intel what it was. He saw that the industry was reaching the limits of scaling CPU technology and that his company's GPUs could step into the spotlight.

Turns out he was right. Without getting into too much technical detail, if you shift the focus to chips that are very like GPUs -- such as the company's Grace Blackwell "Superchip" -- with CPUs running a supporting role, you can run power-hungry applications and continue to scale them up. And AI is undoubtedly power-hungry.

Nvidia doubled down on this tech before it was fashionable, so when AI exploded onto the scene, the company was already there, supplying the entire industry with its tech. Now AI servers run by the likes of Alphabet, Amazon, and Microsoft are powered by Nvidia chips.

Whether AI pans out -- and when -- is critical

Nvidia went from a relatively niche computing company, mostly servicing the video game industry, to one of the largest companies in the world. Just look at this reversal of fortunes from the once-dominant CPU maker, Intel. The chart shows revenue for both companies over the last 10 years on a trailing-12-month (TTM) basis.

NVDA Revenue (TTM) data by YCharts

That is a twist of fate. But fate can be fickle. Nvidia's future largely depends on AI delivering on its promise. Much has been made of its revolutionary power, but there is still a lot to prove. It wouldn't be the first time a technology failed to deliver on the hype surrounding it. Still, I think there's more reason to believe AI isn't a fluke than some past hype cycles, so then it's a matter of when it can deliver.

If the AI value chain is a river, Nvidia is somewhere in the middle, upstream from the companies that actually deliver AI products to the end market. If those companies have overpromised on their products' value or can't deliver in time, the river gets dammed up downstream, potentially leading to a glut of unwanted chips. For Nvidia to continue the incredible growth it has been experiencing, enough to justify the premium value investors have placed on it, end-user demand has to keep the river flowing freely.

Keep an eye on how well the end-user AI applications are doing. Try some out. Do you see the value? The more useful these tools are, the higher the river's watermark and the more likely Nvidia is to deliver on its sky-high expectations.

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

The post Nvidia is no longer the most valuable company in the world. Here's what investors need to know 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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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. Johnny Rice has no position in any of the stocks mentioned. 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, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended 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.

It's been a wild ride for Nvidia (NASDAQ: NVDA) investors. The stock is up 190% since this time last year as the company has positioned itself brilliantly as the dominant chip provider for the artificial intelligence (AI) market. Big tech players like Amazon, Microsoft, and Alphabet are all turning to Nvidia's technology to power their AI offerings.

The skyrocketing share price led Nvidia to split its stock 10-for-1, which it executed earlier this month. The move lowered the barrier of entry for investors, opening up the door for smaller investors and a larger portion of the retail market.

Since the split announcement, the stock is up 33%, despite the fact shares have retreated from their peak over the last week. After one of the most incredible runs in stock market history, is Nvidia still a buy?

Nvidia looks overvalued at first glance

One of the most common ways to value a company is its price-to-earnings (P/E) ratio. Nvidia boasts a P/E multiple of 70 as of this writing. Compare that to the two tech giants it's currently battling for the title of world's largest company by market capitalization, Microsoft and Apple, which have P/E ratios of 39 and 33, respectively.

Nvidia appears overvalued from this perspective, but here's the thing: the P/E ratio isn't the best metric when evaluating a company in hypergrowth mode. Despite Nvidia's already massive size, it's still growing at triple-digit rate.

The price/earnings-to-growth ratio (PEG) can take this growth into account, and traditionally, a PEG ratio of less than 1 is considered undervalued.

Data by YCharts.

Of this trio, Nvidia is the only stock with a PEG ratio below 1, meaning its current valuation is much more reasonable than P/E alone would show. Keep in mind, though, that no single metric will give you a complete picture. The PEG ratio relies on growth forecasts, which are far from guaranteed.

So are analyst's growth predictions reasonable?

The bar is high for Nvidia, but there's ample reason to believe it can deliver

The company has already shown it can scale rapidly and grow revenue at a blinding pace. So while Wall Street's expectations are high, Nvidia's own guidance set its fiscal 2025 second-quarter revenue target at $28 billion. That's an 8% increase from the previous quarter and a 107% increase year over year. Most companies would kill to see those kinds of numbers.

These results are only possible because the demand for Nvidia's chips is still incredibly high, and the company has yet to encounter true competition.

Other companies, like AMD, are developing chips to cut into Nvidia's market share, but at the moment, they have a lot further to go. Nvidia has been one step ahead and is promising a development cycle that AMD will struggle to keep up with for several reasons, not the least of which is that it spends nearly twice as much as AMD on research and development.

The broader demand for AI that's driving Nvidia's success doesn't seem to be slowing down as PwC believes AI can add $15.7 trillion to the global economy by 2030. That means there's a long way to go until demand drops, and Nvidia stock still has room to run if it can defend its market share.

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

The post After Nvidia's 10-for-1 stock split, is it 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

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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

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. Johnny Rice 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 Advanced Micro Devices, Alphabet, 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 Alphabet, 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.