If I Could Choose Just One Stock: Nvidia Takes the Lead

In today's investing landscape, there are many compelling reasons to consider purchasing shares of Nvidia, a leader in technology. After a closer look, it’s clear that this company stands out, especially given the recent trend of stock splits that have garnered renewed interest among investors.

Over the past few years, stock splits have seen a resurgence in popularity. Companies that split their shares usually do so after experiencing significant growth and impressive financial performance, resulting in a rising stock price. Recent examples of companies that have split their stock include:

• Nvidia (executing a 10-for-1 split in June 2024).
• Chipotle (announcing a 50-for-1 split in June 2024).
• Broadcom (delivering a 10-for-1 split in July 2024).
• Super Micro Computer (executing a 10-for-1 split in September 2024).

A common thread among these companies is their consistent record of delivering market-beating returns.

Nvidia's Visionary Leadership

If I were to pick just one stock today, Nvidia would be my top choice, and here's why. A significant factor driving my interest in Nvidia is its CEO, Jensen Huang. He has shown an extraordinary ability to predict emerging trends in technology and develop innovative solutions.

Nvidia first made waves in 1999 with the introduction of the graphics processing unit (GPU), which transformed the gaming industry. By 2006, the company had already adapted this technology to enhance supercomputing. Today, Nvidia’s GPUs are the standard in cloud computing, controlling 98% of the data center GPU market.

Interestingly, Huang has been positioning Nvidia for the AI revolution since 2013. At that time, he recognized the long-term potential of AI before it became widely recognized, allowing Nvidia to harvest the rewards of its early investments as the market for AI exploded last year.

Impressive Financial Performance

Nvidia's financial results speak volumes about its success. In the second quarter of its fiscal year 2025, which ended on July 28, Nvidia achieved record revenues of $30 billion, a remarkable 122% increase compared to the previous year and a 15% increase from the prior quarter. The company’s data-center revenue alone soared to $26.3 billion, marking a staggering 154% jump.

Looking ahead, management projects continued growth, albeit at a slightly slower pace. They expect revenue of $32.5 billion for the upcoming year, which reflects a year-over-year growth rate of 79%. This indicates that while the earlier explosive growth may taper off, it is still impressive.

Why Invest Now?

You may wonder if it’s too late to invest in Nvidia after the stock’s remarkable rise, which has seen an 837% increase since early last year and reached record highs recently. While it's valid to be cautious, I believe we are only in the early stages of AI development. New applications for AI are continually emerging, and while there may be some challenges along the way, these hurdles can be overcome as the technology matures.

Market estimates for the generative AI sector are vast, with some putting it at a value of $1.3 trillion by 2032. However, more optimistic assessments, like those from Cathie Wood of Ark Invest, suggest the AI software market could drive an additional $13 trillion in spending by the end of the decade, with some projections reaching as high as $37 trillion. The unpredictability of the generative AI market means that it could grow even larger than anticipated.

Some investors may argue that Nvidia's stock is overpriced and that it is trading at a premium. Currently, Nvidia trades at 64 times its earnings and 35 times its sales ratio. While these figures appear high, it's important to consider that analysts have often underestimated Nvidia’s potential. For the fiscal year 2026, starting in January, analysts forecast an EPS of $4.05, translating to about 33 times forward earnings, not disproportionately higher than the S&P 500's average of 30 times earnings.

Considering Nvidia's projected profit growth of 52% annually over the next five years, the stock’s valuation can be justified.

Lastly, I trust Huang to foresee upcoming trends and adapt Nvidia's technology accordingly to capitalize on them, ensuring the company remains profitable.

With all these factors in mind, it’s clear why Nvidia stands out as my top investment choice right now.

Nvidia, Stocks, AI