Key Points
Nvidia is forecasting huge data center growth through 2030.
The company's stock is cheaper than a lot of popular investment picks.
A few weeks back, I was pounding the table about how good a value Nvidia(NASDAQ: NVDA) was. However, the stock has been rising and is now within a few percentage points of hitting a new all-time high. That's a far cry from the 20% below its all-time high where it was at the start of April.
The question now is obvious: Is Nvidia still a buy after returning to all-time highs? I think the answer is pretty clear -- and is a resounding yes.
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Investors still haven't priced in Nvidia's massive growth
Nvidia now trades for 24 times forward earnings estimates, which really isn't all that expensive. For reference, the S&P 500 (SNPINDEX: ^GSPC) trades at 21.6 times forward earnings as I write this. Some other notable names and their price tags are Alphabet at 28 times forward earnings, Apple at 31.2 times forward earnings, and Costco at 49 times forward earnings. Nvidia is one of the premier artificial intelligence (AI) stocks and gives investors the ability to make money from the AI build-out right now, so I think the valuation makes it a buy.
There is still a ton of building left to go before the AI hyperscalers have the computing capacity they desire. Data centers don't go up overnight, and the billions of dollars in infrastructure spending announced last year are just starting construction now. It will be several years before they are ready to purchase Nvidia chips, stretching Nvidia's growth cycle out several years beyond 2026 or 2027.
In fact, Nvidia executives estimate that global annual data center capital expenditures will rise to $3 trillion to $4 trillion by 2030. While that may seem like a far-off projection, they are in the industry, with access to far more information than most investors. As a result, I think we should give credence to the idea that we're still in the very early innings of the AI build-out.
And if we are, Nvidia's stock still has a ton of room to run. In fact, Wall Street analysts have a one-year price target of $269 on the stock -- indicating 35% upside. However, if you combine the growth rate of the AI industry with Nvidia's massive market share and new product release (the Rubin chip family will unlock incredible new AI capabilities), Nvidia is still an excellent stock to buy and hold for several years, even if it returns to all-time highs.
Should you buy stock in Nvidia right now?
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Keithen Drury has positions in Alphabet and Nvidia. The Motley Fool has positions in and recommends Alphabet, Apple, Costco Wholesale, and Nvidia. The Motley Fool has a disclosure policy.
