Three Persuasive Justifications Make Nvidia Shares a Wise Investment Choice
Nvidia's (NVDA) stock has been on a meteoric rise, seeing a staggering 145% increase year-to-date, outperforming the S&P 500. This impressive performance extends further back, with the tech giant's shares skyrocketing 487% over the past three years and a mind-blowing 2,740% over the past five years.
Despite this astronomical growth, Nvidia's long-term valuation remains appealing, trading at 28.5 times fiscal 2027 projected earnings. With investors questioning if this stellar performance can continue, let's explore three reasons why Nvidia's shares remain an excellent buy-and-hold choice.
Reason No. 1: Generous Shareholder Rewards
Nvidia has demonstrated a strong commitment to returning value to shareholders. In the second quarter of fiscal year 2025 alone, the company repurchased 62.8 million shares for $7 billion. Most recently, the board approved an additional $50 billion for share repurchases, bringing the total available to $53.9 billion as of August 26.
Although the company's dividend program may not seem as captivating due to its microscopic 0.03% yield, an increase to $0.01 per share on a post-stock-split basis this year underscores management's dedication to rewarding loyal shareholders.
This strategic focus on capital returns distinguishes Nvidia from many high-growth tech companies that abandon dividends to reinvest in the business. The combination of aggressive share repurchases and consistent dividend growth provides investors with diverse avenues for returns, setting Nvidia apart from its competitors.
Reason No. 2: Riding the AI Wave
Nvidia is perfectly positioned to capitalize on the artificial intelligence (AI) revolution. The company's graphics processing units (GPUs) are the leading choice for AI and machine learning applications due to their superior performance. Nvidia's dominance in AI is evident in its data center revenue, which continues to experiences outrageous growth.
Industry experts predict that AI will generate transformative impacts on the global economy in the near future. By 2035, Accenture foresees AI doubling annual global economic growth rates, while PricewaterhouseCoopers estimates an increase in global GDP up to 14% by 2030 due to AI adoption.
By holding the reins in AI hardware technology, Nvidia is poised at the forefront of this revolution. Its GPUs are essential for training large language models and powering AI applications across various industries. As AI adoption accelerates, Nvidia stands to benefit significantly from heightened demand for its specialized hardware.
Reason No. 3: Robust Data Center Growth
Nvidia CEO Jensen Huang envisions a future where massive GPU data centers power AI interactions across the internet. This vision is coming to fruition as major tech companies ramp up their GPU purchases. For instance, Microsoft aims to triple its GPU supply to 1.8 million units this year.
Other tech giants, such as Meta Platforms and Tesla, are also investing heavily in AI infrastructure, fueling demand for Nvidia's hardware. Analysts anticipate even more spectacular growth in the future, with million-GPU clusters expected to become commonplace by 2027, hailing a significant shift from clusters containing tens of thousands of GPUs currently.
By leveraging its dominant market share, Nvidia could potentially generate $320 billion from the data center segment by 2027 or more – dramatically surpassing its current estimates of between $106 billion and $121 billion in data center revenue for fiscal 2025.
As AI applications proliferate across industries, Nvidia's hardware is likely to assume an increasingly crucial role in powering these technologies. The company's robust financial position and strategic focus provide a solid foundation for sustained growth.
While past performance does not guarantee future results, Nvidia's technological leadership and strategic positioning render it an appealing choice for investors seeking to capitalize on the AI megatrend. The company's ability to innovate and adapt to rapidly evolving market dynamics will be essential as it navigates the competitive AI landscape.
In light of these reasons, investors might consider the potential for further finance-related gains by investing in Nvidia's stocks, given its profitable shareholder rewards and dividend program. The company's generous share repurchases and commitment to shareholder value make it an attractive option for investors seeking returns.
Moreover, as the artificial intelligence (AI) wave continues to grow, Nvidia's position as a leading provider of AI hardware technology could provide significant opportunities for financial investment. With the predicted transformative impact of AI on the global economy, Nvidia's dominance in this field could lead to substantial financial gains for its investors.
