Nvidia (NVDA) was a top-performing stock for several years, but the AI ​​boom put this chip stock in the spotlight in 2023. Triple-digit year-over-year revenue gains became the norm each quarter and remain so to this day. Some investors might be nervous about a bubble since Nvidia has gained so much, but I remain optimistic about this stock and the AI ​​opportunity. That’s because Nvidia is outperforming its competition, capitalizing on the industry’s explosive growth, and continuously innovating to maintain its dominant position.

As a refresher, Nvidia is known for designing and manufacturing graphics processing units (GPUs), which are widely used in gaming, professional visualization, data centers, and especially artificial intelligence applications.

The CAGR of the artificial intelligence industry

Artificial intelligence will increase significantly in the coming years. Data from Grand View Research suggests that the AI ​​industry will maintain a compound annual growth rate (CAGR) of 36.6% from now until 2030.

While this is good news for AI companies in general, it’s even better news for Nvidia. Nvidia is growing faster than its competitors, and an expanding industry gives Nvidia more room to expand.

Recent statements by former Google (GOOG) (GOOGL) CEO Eric Schmidt have shown that many tech giants are increasing their investments in AI. He mentioned that some companies are willing to invest $20 billion to $100 billion in AI infrastructure. Many companies will benefit from this, but Nvidia will benefit the most from this development.

Why companies rely on Nvidia chips

Nvidia has a huge technological lead over its competitors. Some of its offerings are unrivaled and critical to AI infrastructure. This rare advantage helps Nvidia set high prices for its products and services.

As competitors develop their own AI chips and resources, Nvidia is building close relationships with major technology companies. Additionally, Nvidia is constantly developing new chips to stay a few steps ahead of the competition. Even as the tech giants develop their own AI chips, they continue to work with Nvidia because the company is unmatched in a booming industry.

Nvidia is the gateway to an industry that feels as revolutionary as the internet, and the tech giants aren’t going to miss this opportunity, even if the cost of entry is high.

Demand continues to grow

The forecasts of other AI companies can provide clues as to where Nvidia is headed. Super Micro Computer (SMCI) is an Nvidia partner that has also benefited from the AI ​​boom, and its outlook for fiscal 2025 should be encouraging for Nvidia investors.

Super Micro generated $14.94 billion in fiscal 2024 and forecasts revenue between $26.0 billion and $30.0 billion for fiscal 2025. After Super Micro more than doubled its revenue in fiscal 2024 year over year, the company is expected to achieve a similar result in fiscal 2025. The company also mentioned that a delay in Nvidia Blackwell will not have a major impact on revenue.

Rising demand for Super Micro’s AI products suggests that Nvidia will experience robust demand growth in the coming quarters. Nvidia also reported optimistic earnings numbers that suggest more growth is ahead for long-term investors.

Nvidia’s revenue

Nvidia’s revenue grew 262% year over year in the first quarter of fiscal 2025. While that’s an incredible number, what’s even more impressive is that investors have been conditioned to expect such growth rates from Nvidia. In addition, net income grew 628% year over year, resulting in a net profit margin of 57.1%.

Nvidia CEO Jensen Huang called AI “the next industrial revolution” in the company’s first-quarter press release. The financials certainly paint that picture, as Nvidia is expected to generate revenue of $28.0 billion in the second quarter of fiscal 2025, plus or minus 2%.

However, Nvidia is likely to exceed this forecast. Not only does Supermicro’s full-year forecast indicate booming demand in the industry, but Nvidia exceeded its own forecast in the first quarter.

The AI ​​leader announced as part of its fourth quarter fiscal 2024 results that it expects revenue of $24.0 billion (plus or minus 2%) in the first quarter of fiscal 2025. In a pleasant surprise, Nvidia closed the first quarter with revenue of $26.0 billion. This figure is 8.3% higher than Nvidia’s forecast. Assuming Nvidia can pull this off again, it’s possible that the company’s total revenue will exceed $30 billion in the second quarter of fiscal 2025.

Is NVDA stock a buy according to analysts?

According to Wall Street analysts, Nvidia is one of the best stocks to buy. Nvidia has received 37 buy recommendations and four hold recommendations over the past three months, giving the company a consensus rating of Strong Buy. The average price target on NVDA stock suggests 16% upside potential from current levels. The highest price target of $200 means Nvidia can gain another 61% from current levels.

View more NVDA analyst ratings

The conclusion on Nvidia shares

Nvidia is the undisputed leader in artificial intelligence. The company is likely to continue to be the biggest winner going forward, with the industry showing a compound annual growth rate of 36.6% through 2030. The stock has outperformed market indices for several years and was briefly the most valuable publicly traded company in the world. Nvidia will likely reclaim that crown.

Artificial intelligence is an innovative opportunity that Huang compared to the industrial revolution. While that comparison comes from Nvidia’s CEO, the billions of dollars pouring into Nvidia’s coffers come from many tech giants who recognize the rising potential of AI. Therefore, Nvidia is a promising growth stock that should continue to lead the stock market higher.

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