The company's shares are a better value than its biggest rival despite delivering significantly more stock growth.
It feels like analysts have reported new growth for Nvidia's (NVDA 4.03%) stock nearly every week for more than a year now. Experts have said the company's shares are overvalued on more than one occasion. And yet, its stock price just keeps rising.
Nvidia's shares have risen 174% over the last year, 122% year to date, and have popped again this month. The company's stock has jumped 25% in the last 30 days, thanks to another earnings beat and continued dominance in AI. So, you might be asking yourself, is it still worth investing in Nvidia, and does it have much to offer new investors?
Past gains and the company's position in tech suggest Nvidia's stock remains an attractive option for those in it for the long haul. Tech stocks are known for delivering significant gains to patient investors, and Nvidia holds one of the most powerful positions in the industry.
So, here's why Nvidia remains a screaming buy, even after its stock just exploded.
Growth catalysts across tech
Nvidia has created countless bullish investors since last year, almost entirely due to its expanding role in artificial intelligence (AI). A boom in the market has sent demand for graphics processing units (GPUs) skyrocketing, with Nvidia perfectly positioned to immediately begin supplying its chips to companies across the market.
As a result, the company's quarterly revenue gained 93% since last year, with operating income and free cash flow increasing by 149% and 281%.
While Nvidia has massive growth potential in AI, and will likely benefit from the market's tailwinds for years, it's also crucial to note the company's other positions in tech. Demand for chips is rising throughout the industry as virtual/augmented reality, autonomous vehicles, video games, cloud computing, and more require more powerful hardware to take their products to the next level. Consequently, Nvidia has growth catalysts in multiple areas of tech.
In the first quarter of 2025 (ending April 2024), Nvidia's revenue increased by 262% year over year, with operating income soaring 690%. The company's AI-centered data center segment was responsible for the bulk of that growth, posting revenue gains of 427%.
However, Nvidia's gaming segment, which includes income from GPU sales to consumers and custom chips for consoles, reported a solid 18% rise in revenue. Meanwhile, its professional visualization and automotive divisions delivered revenue growth of 45% and 11%.
The video game market alone was valued at $217 billion in 2022 and is projected to expand at a compound annual growth rate of 12% until at least the end of the decade. Additionally, Nvidia sees massive potential in automotive in the coming years as self-driving technology progresses, with CFO Colette Kress calling it a potential multibillion-dollar business for Nvidia.
Nvidia's business appears to be snowballing as the entire tech market advances, suggesting its stock could be nowhere near hitting its ceiling.
Nvidia is a better value than AMD, according to multiple metrics
Throughout Nvidia's meteoric rise, analysts have often compared the company to its top competitor, Advanced Micro Devices. The fellow chipmaker holds the second-largest market share in GPUs (after Nvidia) and is similarly expanding in AI, although with a late start compared to Nvidia. As a result, AMD's stock enjoyed some sympathy growth from Nvidia's success, rising 33% since last June.
While some analysts have said AMD could be a better stock to invest in AI, the chart below shows Nvidia's shares offer significantly more value.
Data by YCharts
This chart compares the valuations of Nvidia and AMD using forward price-to-earnings, price-to-free cash flow, and price/earnings-to-growth metrics. Each one compares a company's share price with a financial metric, making them helpful ways to determine a stock's value. For each metric, the lower the figure, the better the value.
As a result, Nvidia is a bargain compared to AMD despite delivering significantly more stock growth over the last year. Meanwhile, the company's head start in AI has granted it a dominant position that will be challenging for competitors to overcome, with its stock a potentially more reliable option.
Given its diverse business model and growth catalysts across tech, Nvidia is a screaming buy for long-term-minded investors.
Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
