Better Buy Now: Nvidia or Other Dow Stocks?

Nvidia (NASDAQ: NVDA) recently took the place of Intel in the Dow Jones Industrial Average (DJINDICES: ^DJI), enhancing the index's exposure to technology and semiconductors.

Having surged an impressive 910% since last year, some investors might question whether this remarkable rally has peaked and whether investing in the other 29 stocks in the Dow might present a better opportunity.

Here are several reasons to consider Nvidia as a growth stock, alongside reasons why a Dow investment could be a more attractive option for certain investors.

Reasons to Buy Nvidia

Nvidia has risen to the status of the most valuable company globally by shifting from a focus primarily on gaming and graphics visualization to becoming a key player in developing advanced products for artificial intelligence (AI) applications. The main reason to invest in Nvidia is the belief that it will continue leading in AI technology, allowing its clients to profit from AI, which in turn drives demand for Nvidia's products.

Despite rumors regarding a slowdown in the AI boom, Nvidia continues to show strong sales and earnings growth. Over the past year, Nvidia's stock jumped 130.7%, while its earnings increased by 112.6%, indicating that its valuation remains fairly justified. However, analysts predict a cooling in growth, estimating earnings per share (EPS) of $4.37 for fiscal 2026 compared to $2.95 for fiscal 2025. Nonetheless, this still reflects an earnings growth of 48% in just one year.

Nvidia can outperform the Dow in the long run if its fundamentals align with its current valuation, meaning it must continue to see earnings grow sufficiently to back up the substantial stock appreciation without appearing overly valued. For instance, if Nvidia averages 25% earnings growth over the next five years and its stock rises by an average of 20% during the same period, it is positioned to outperform both the Dow and the S&P 500, which traditionally sees about a 10% annual gain.

Why Choose to Invest in a Dow ETF Instead

Rather than purchasing individual shares of the other 29 Dow components, investing in a Dow exchange-traded fund (ETF)—like the SPDR Dow Jones Industrial Average ETF Trust (DIA)—could be a simpler choice. With a low expense ratio of 0.16% and $37.7 billion in net assets, the ETF provides straightforward investment access. Since the Dow is price-weighted, Nvidia constitutes a modest 2.1% of the index. Thus, a $1,000 investment in the ETF means about $979 goes to the other 29 component stocks, and only $21 is directed towards Nvidia.

The Dow offers an appealing option for investors seeking more value and income. The SPDR Dow Jones Industrial Average ETF Trust features a P/E ratio of 26.2 and a yield of 1.7%, which surpasses the 29.8 P/E ratio and 1.3% yield from the Vanguard S&P 500 ETF or the 41.2 P/E ratio and 0.6% yield from the Invesco QQQ Trust, which tracks the Nasdaq-100.

Choosing the Right Investment Approach

In just a few short years, Nvidia transformed into a leading tech giant, influencing various major indices including the S&P 500, Nasdaq Composite, and now the Dow Jones Industrial Average. For investors bullish on Nvidia, this is promising. However, it creates concern for those who think Nvidia's valuation is excessive.

Since Nvidia represents a small portion of the Dow, investing in a Dow ETF enables exposure to top companies without a substantial commitment to Nvidia itself. Other low-cost ETFs worth considering for investors prioritizing income and value are the Vanguard Value ETF, Vanguard Mega Cap Value ETF, and Vanguard High Dividend Yield ETF.

Nvidia stands out as an extraordinary company historically, achieving rapid growth while simultaneously delivering strong earnings. Unlike many previously exciting stocks relying on future profits, Nvidia is currently exhibiting substantial earnings growth in real time.

In its latest quarter, Nvidia reported an astounding net income of $19.3 billion, comparable to Microsoft’s $24.7 billion during the same period. As one of the most profitable firms, Nvidia is also outpacing other mega-cap tech companies in growth rates. As long as this trend continues, Nvidia should keep rewarding its investors. But investors should evaluate if this stock aligns with their risk tolerance.

Nvidia, Dow, Investing