Reuben Gregg Brewer, The Motley Fool
6 min read
In This Article:
-
Nvidia is viewed as a bellwether for artificial intelligence stocks.
-
An early lead in a sector that is developing rapidly doesn't mean a company will always remain the leader.
-
The demand for electricity is something that's certain about AI that investors can confidently invest in for the long term.
Nvidia (NASDAQ: NVDA) reported yet another quarter of strong growth with its fiscal first quarter 2026 earnings. Revenue rose a massive 69% year over year and was up 12% sequentially. Demand from data centers was the big driver of performance, with revenue from this customer group up 73% year over year.
That level of growth is the big reason these three stocks will be great buy-and-hold investments if you want to tap into AI growth.
Nvidia is performing exceptionally well as a business. But this isn't a secret, and the stock price is up over 1,400% over the past five years. Although the stock's price-to-sales and price-to-earnings ratios are reasonable when compared to their five-year averages, it would be hard to suggest that Nvidia is a cheap stock. Indeed, the P/E ratio is a lofty 45x. A lot of good news is already priced in here.
The glass-half-full argument is that Nvidia has a lot of good news to offer, and there's no sign that the good news is going to stop flowing. But artificial intelligence (AI) is still a very young industry. At one point, Yahoo! looked like a category killer in search, but it was still surpassed by Alphabet's Google service. It is still early days in AI, and it remains difficult to predict which companies, from Nvidia to Palantir Technologies, will be the long-term winners.
But there's one thing that is very clear: AI and the data centers in which it lives are going to increase demand for electricity by a massive amount. By the National Electrical Manufacturers Association's estimate, the increase in electricity demand will be around 300% over just the next decade. And that will lead to a step change in the demand for electricity. Demand rose by a grand total of 9% between 2000 and 2020 but is expected to increase by 55% between 2020 and 2040.
AI is great, but it stops working if you turn off the power switch. And it draws a massive amount of power from the electrical grid. AI growth is going to be good for electricity providers across the board. The safest play is probably a utility like NextEra Energy (NYSE: NEE). This company is really two businesses in one.
