Ryan Vanzo, The Motley Fool
5 min read
In This Article:
-
Nvidia remains a must-own stock for AI investors.
-
SoundHound AI could provide even bigger gains.
Warren Buffett's conglomerate Berkshire Hathaway is famous for its long-term performance. Since he took over the company almost six decades ago, shares have produced annualized gains of more than 20%. Few investment vehicles in history have been able to provide this level of returns for such a long stretch of time.
While it won't be easy for investors to achieve similar returns, the artificial intelligence (AI) revolution should provide some compelling opportunities. According to forecasts by Grand View Research, the AI market could grow by 30% or more per year over the next decade and beyond. By investing in the right AI stocks today, you could generate Buffett-style returns over time -- and the two look like your best bets right now.
While it has gotten a ton of press and attention already, Nvidia (NASDAQ: NVDA) remains a must-own stock for every investor looking to capitalize on the rise of AI.
The story here is simple. AI spending has been skyrocketing in recent years, with most forecasts calling for double-digit percentage growth throughout the next decade and beyond. Nearly all of this growth will depend on GPUs and other specialized AI accelerator chips: high-powered parallel processors that provide the specific types of computational muscle to make training and running complex AI models possible. Because it already held the leading position in the GPU space when the AI revolution took off, Nvidia now controls roughly 90% of the market for GPUs destined to support AI applications. So at least right now, if AI innovation and spending continue to rise, Nvidia will directly benefit due to rising demand for its GPUs.
Nvidia's dominance in GPUs is no joke. When it unveiled its latest GPU architecture, dubbed Blackwell, last year, the next-gen chips quickly sold out for the next 12 months. According to one report from October, "Customers who have not yet placed an order with the company won't receive any Blackwell products until late 2025."
Just to make it clear, Nvidia is by no means competing on price. In fact, it has the highest gross margin by far in the industry, reflecting both its superior offerings and its strong pricing power.
There are some long-term concerns. Nvidia may not be able to maintain its high market share, technological superiority, or high gross margins forever. But even if it does cede some market share and profitability, there's a good chance the company can continue to grow at double-digit percentage rates for far longer than its current valuation of 44 times earnings suggests.
