The AI market is projected to grow at a compound annual rate of 37%, reaching nearly $2 trillion by 2030. Within this market, Nvidia is positioned as a leading beneficiary, according to CFRA analyst Angelo Zino. The company's stock has experienced remarkable growth, gaining over 31, 400% in the past 24 years at an annual rate of 27. 4%. For instance, an initial investment of $10, 000 in January 2000 would now be worth around $3. 1 million. Nvidia's stock price performance from 2000 to 2023 is illustrated in the chart below. Nvidia's groundbreaking invention of the graphics processing unit (GPU) in 1999 revolutionized visual effects in gaming and multimedia. Their GPUs have become the industry standard for video game graphics and professional visualization, dominating over 95% of the workstation graphics processor market. Additionally, Nvidia's GPUs have been integral in creating Academy Award-nominated films for best visual effects over the past 15 years. In 2006, Nvidia introduced the CUDA programming model, which transformed their GPUs into versatile processors and paved the way for their dominance in data center operations. Today, Nvidia's GPUs are regarded as the gold standard for accelerating workloads in AI, data science, and scientific computing. The company holds approximately 95% of the data center GPU market share and 80% to 95% of the AI chip market. To expand its presence in the data center industry, Nvidia acquired Mellanox, a high-performance networking company, in 2019. They also entered the CPU market in 2023, competing against Intel and Advanced Micro Devices. Nvidia's purpose-built InfiniBand and Spectrum-X networking platforms, as well as their Grace CPUs, are designed specifically for AI applications and have already gained significant traction. The networking segment alone is estimated to be worth $10 billion, while the CPUs are poised to become a multibillion-dollar business in the near future, according to Nvidia management. In 2021, Nvidia ventured into subscription software with AI Enterprise, a platform that simplifies the development and deployment of AI applications across various fields. This software suite includes frameworks for creating recommender systems, intelligent avatars, and computer vision systems.

In 2023, Nvidia expanded into cloud services with Omniverse Cloud and DGX Cloud, which integrate supercomputing infrastructure, software, and pretrained machine learning models to support the development of 3D, AI, and robotics applications. Additionally, Nvidia recently introduced foundry services that utilize DGX Cloud to help businesses customize large language models and build generative AI applications. In summary, Nvidia has evolved from a leading GPU company to a full-stack data center computing company focused on graphics and AI. Its comprehensive solutions across infrastructure, software, and services solidify its leadership position in these markets. With its full-stack AI/software capabilities, Nvidia possesses a strong competitive advantage, as stated by analyst Angelo Zino. The revenue breakdown for each business segment in the third quarter of fiscal year 2024 (ending Oct. 29, 2023) is displayed in the graph below. Considering the projected 37% annual growth in AI spending and the approximately 28% annual expansion of the graphics processor market through 2030, Nvidia is exceptionally well-positioned to capitalize on both trends, potentially more so than any other company. Analysts on Wall Street forecast a 40% annual sales growth for Nvidia over the next five years, making its current valuation of 23. 6 times sales appear reasonable. Thus, investors with a five-year time horizon may consider buying a small position in Nvidia stock. Before making any investment decisions concerning Nvidia, it is advisable to take into account additional factors. Stock Advisor, for instance, provides investors with a comprehensive blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. It's worth noting that the Stock Advisor service has generated a return triple that of the S&P 500 since 2002*. Keep in mind that Trevor Jennewine holds positions in Nvidia, and The Motley Fool holds positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool also recommends Intel and suggests various options related to Intel. Please refer to The Motley Fool's disclosure policy.