Maximizing Returns in the AI Boom: Why Nvidia Is a Must-Have in Your Tech Portfolio

Artificial intelligence (AI) stocks have been powering market gains in recent times thanks to the technology's future potential. By using AI, companies can become more efficient, develop better products faster, and more -- and this could result in soaring earnings down the road.

That's why companies are now investing in AI platforms, and this trend has helped earnings climb today for makers of the tools necessary for AI to function. These particular players don't have to wait for AI to boost revenue and profit, and one in particular stands out right now.

I'm talking about chip designer Nvidia (NASDAQ: NVDA). The company's graphics processing units (GPUs) power some of the most crucial AI tasks, like training and inferencing large language models, so that these models can then go on to do their job of solving complex problems.

If you want to set yourself up for an AI win, you should invest in a variety of stocks, from those using AI to improve their businesses to those selling AI tools. And to maximize your returns in this AI boom, you'll want to include Nvidia in the mix. Here's why this top stock is a must-have in your tech portfolio.

maximizing returns in the ai boom: why nvidia is a must-have in your tech portfolio

A human profile is shown against a backdrop of code.

Nvidia's broadened revenue opportunity

First, a quick summary of Nvidia's path so far. Several years ago, Nvidia's GPUs mainly served the video games industry. However, as it became obvious that the GPU's speed could serve many other industries, Nvidia's revenue opportunity broadened. Fast forward to a few years ago, when AI began to emerge as the next high-growth technology area. Here, it was clear that the GPU's ability to handle many tasks simultaneously made it perfect for those developing AI platforms.

Nvidia focused its attention there not only on selling GPUs but also on offering related products and services, such as enterprise software. Nvidia is now an AI powerhouse, generating more than $47 billion from this business last year -- compared to about $10 billion from the video games industry.

In recent quarters, the company has reached record revenue, grown revenue and net income in the triple digits, and widened margins. Nvidia also holds 80% of the AI chip market and is known as the go-to source for premium AI chips.

Even Tesla CEO Elon Musk recently said: "There is currently nothing better than Nvidia hardware for AI."

A fantastic track record

This fantastic track record is part of the reason Nvidia should be in your AI portfolio, but the rest of the reason may be even more important. That's because Nvidia is set to remain in its dominant position despite growing competition from other chipmakers, even if those rivals gain more market share.

Nvidia should continue its leadership due to the high demand for AI chips and related products and thanks to its innovation. The level of demand is outstripping supply, and we're only in the early days of AI development. That suggests demand could increase, and Nvidia and other companies, such as Intel and Advanced Micro Devices, can each score an AI win.

As for innovation, Nvidia is making this its priority, pledging to update its GPUs on an annual basis, which should keep it ahead of the crowd. Even if a rival releases a better chip today, a few months down the road, Nvidia will top that with its next GPU. Next up is the company's Blackwell architecture and most powerful chip yet, set for release later this year, and Nvidia says it will launch "other Blackwells" down the road.

Nvidia's stock has climbed in recent weeks, lifting valuation to 46 times forward earnings estimates compared to less than 30 times earlier this year. But even at this price, Nvidia represents a solid buy for the long-term investor because of the company's well-established dominance -- and its strategy to stay ahead.

And that's why, if you want to maximize your returns in this AI boom, you'll add Nvidia to your portfolio and hold on for the long term as the AI growth story continues to pick up speed.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $775,568!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 10, 2024

Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.

OTHER NEWS

8 hrs ago

Kakamega father introduces young sons to carpentry, shows off beautiful furniture

8 hrs ago

Houthis Strike Fear into U.S Navy: Devastating Blitz Shake Pilots, Forcing to 'Retreat' from Red Sea

8 hrs ago

The ‘Zen spirit’ of Japanese photographer Hiroshi Sugimoto’s monumental Seascapes series

8 hrs ago

Create ministry to address marginalisation, Biafra agitation – Ohanaeze to Tinubu

8 hrs ago

Starbucks Stock Is Underperforming the S&P 500 in 2024, but These Other 2 Coffee Stocks Are Soaring.

8 hrs ago

SoftBank Missed Out On $160 Billion in Gains With Artificial Intelligence (AI) Leader Nvidia -- but Its Regret Will Likely Be Short-Lived

8 hrs ago

WEC Sao Paulo: Kobayashi claims pole in Toyota 1-2

8 hrs ago

The Latest 2025 Social Security Cost-of-Living Adjustment (COLA) Forecast Has Some Great News for Retirees

9 hrs ago

President Tinubu appoints new PenCom DG

9 hrs ago

The IRS Is Denying Billions in Improper Small Business Claims

9 hrs ago

Rooney compares ‘exceptional’ Arsenal, Barcelona target to Ronaldo as England are sent major warning

9 hrs ago

Warren Buffett Eliminated This Stock From Berkshire's Portfolio Last Year. It Has Fallen 32% in the First Half of 2024.

9 hrs ago

Caddie, mantra, help Aussie Kyriacou take control of Evian Championship

9 hrs ago

Ukrainian Forces Capture Putin's Most Advanced T-90M Tank in Stunning Operation | Footage Released

9 hrs ago

Poland: Miner found alive two days after tremor

9 hrs ago

Mercedes-Benz U.S. EV Sales Sharply Declined In Q2 2024

9 hrs ago

5 militants, 3 guards die as Somali forces counter jailbreak in Mogadishu

10 hrs ago

Collapse of school in northern Nigeria leaves more than 20 dead

10 hrs ago

IMF slashes Botswana's 2024 growth forecast amid diamond market woes

10 hrs ago

National Police advertises vacancies for DIG positions with tight deadlines, how to apply

10 hrs ago

Watch: Al-Qassam 'Traps & Blows Up' Israeli Soldiers, detonates Israeli tanks In Gaza's Tal Al-Hawa

10 hrs ago

Fuel subsidy removal achieved nothing – NANS tells Tinubu

10 hrs ago

Hong Kong can use ‘panda economy’ to drum up business amid arrival of 2 new bears: minister

10 hrs ago

Ballon d'Or: Sergio Aguero names favourite to win 2024 edition of France Football award

10 hrs ago

French sports minister takes symbolic dive into river Seine in Paris

10 hrs ago

Ruto's fired Cabinet secretaries to be paid over KSh 54m in gratuity

10 hrs ago

The Best Warren Buffett Stocks to Buy With $500 Right Now

10 hrs ago

Anger after academy for girl footballers is axed

10 hrs ago

Bear rescued from Ukraine dies in West Lothian zoo

11 hrs ago

Russia said to have planned to assassinate German arms boss

11 hrs ago

Euro 2024: Rooney predicts player to score winning goal in final

11 hrs ago

Russia: Kara-Murza lawyer visits jailed Kremlin critic

11 hrs ago

Euro 2024 Final: Keep him under control – Rodri warns Spain about England star

11 hrs ago

Stock-Split Watch: MicroStrategy Is Next

12 hrs ago

Hezbollah 'Mujahideen' Dramatic Blow To Israeli Bases | Absence Of Iron Dome In Northern Borders?

12 hrs ago

Should You Buy ASML Stock Before July 17?

12 hrs ago

3 High-Yielding Dividend Stocks Near Their 52-Week Lows

12 hrs ago

'Jordan, Syria, Israel Will Burn..' Hezbollah Aide Lebanon Warns of Catastrophic War In Middle East

12 hrs ago

Israeli Ship 'Chrysalis' Wrecked by Houthis in Red Sea | Ansarullah's Warning As Gaza Burns| Watch

12 hrs ago

Eddie Ndichu's faces kenyans wrath after crypt tweet asking Ruto for job: "Ndio utupige"

ALONGWALKER VIETNAM: Kênh khám phá trải nghiệm của giới trẻ, thế giới du lịch ALONGWALKER INDONESIA: Saluran untuk mengeksplorasi pengalaman para pemuda global