10 Reasons to Buy and Hold This AI Stock Forever

Globe and Mail

3 days ago

Key Points
Nvidia has delivered explosive gains to investors over the past few years.
The company has many strengths that should keep the momentum going.
10 stocks we like better than Nvidia ›
Nvidia (NASDAQ: NVDA) has demonstrated its ability to deliver major growth to investors, soaring 1,400% over the past five years. It's been a must-buy stock due to its leadership in a market set to reach into the trillions of dollars a few years from now; that's artificial intelligence (AI).
This tech giant designs AI chips, known as graphics processing units (GPUs), that drive the most crucial of AI tasks, so they're key to the development and progress of this field. This has helped Nvidia's revenue skyrocket, and in turn, it's supercharged demand for the stock.
But Nvidia's good days are far from over. In fact, this AI powerhouse is a fantastic stock to buy and hold forever. Here are 10 reasons why.
1. Great leadership
More than 30 years ago, Jensen Huang founded Nvidia, and this executive with big dreams and practical paths to achieve them remains at the helm. Huang is highly focused on the company's success and has led it through a game-changing transformation, from mainly serving the video game industry with its chips to expanding across industries and into AI.
That decision represented a key turning point for Nvidia, and this decision, along with others made by Huang, are the reasons the company is so successful today. And Huang's presence is reason to be confident about the future.
2. A strong growth track record
Nvidia has delivered quarter after quarter of double- and triple-digit revenue increases, and the company has reached record levels of revenue; for example, $130 billion in the latest fiscal year. This shows us that Nvidia has staying power and has been able to keep customers flocking to it for AI chips and other products over time.
3. High profitability on sales
This AI giant is not just generating revenue growth but also delivering high profitability on sales quarter after quarter. We can see this through gross margin, which has surpassed 70% most quarters in recent times, even during moments when expenses are high, such as during product launches.
Many companies, especially in a new growth field like AI, can achieve revenue growth, but profitability is much more difficult to reach. And it's the essential element that helps a company and its investors win over the long term. So, Nvidia's profitability on sales is something to applaud.
4. A focus on innovation
Nvidia has promised to update its chips on an annual basis, and so far, it is doing a great job of that, launching the Blackwell architecture and chip this winter and just now beginning the rollout of a new chip, the Blackwell Ultra. In fact, Nvidia has announced a roadmap out to 2028.
This is important because innovation should be the element to keep Nvidia ahead of rivals.
5. Presence across the AI spectrum
Though we all may think "AI chips" when we think "Nvidia," the company hasn't stopped here. Instead, Nvidia has designed an empire of products and services that address every step of the AI journey, from training and inferencing to developing AI agents and more.
Nvidia has even launched industry-specific platforms to help healthcare or automobile companies, for instance, apply AI to their needs. All this means Nvidia can benefit from every stage of AI growth, and just about any company aiming to develop an AI platform or apply AI to its business could find what they need from Nvidia.
6. A solid moat
This AI empire is Nvidia's moat, or competitive advantage, as it stands out as the only player to offer such a complete portfolio of AI. This isn't something a rival could construct overnight, and Nvidia's innovation suggests it will continue to stay one step ahead in this area.
Of course, rivals still could carve out market share and be successful. However, Nvidia's moat should help it maintain dominance over time.
7. Proven adaptability when faced with challenges
Every company faces tough times at one point or another, and the key question is how that company will handle such situations. Nvidia has shown us its great adaptability. For example, a couple of years ago, it designed a new chip, the H20, compliant with U.S. controls on exports to China. Another more recent example can be seen when, facing the U.S. plan to impose tariffs on imports, Nvidia launched a major investment in manufacturing in the U.S.
Today, Nvidia faces new controls on exports to China that have blocked sales of the H20. But the company's track record of adaptability is reason to be confident about its ability to handle this and future difficulties.
8. The resources necessary to support growth and address challenges
Nvidia has more than $53 billion in cash, and its total assets well outweigh its liabilities.
NVDA Total Assets (Annual) data by YCharts.
This shows that the company has what it takes to support growth and address any headwinds down the road without endangering the financial health of the business.
9. Known for making smart investment decisions
Nvidia has made excellent investment decisions, as we can see from the company's return on invested capital over time and especially in recent years as the AI boom accelerated.
NVDA Return on Invested Capital (Annual) data by YCharts.
So, there's reason to be confident that certain decisions or product launches today or tomorrow will deliver growth down the road. For example, Nvidia recently released a product that will make it easier for a broader range of customers to use its systems. This may seem like a small move, but it could deliver big down the road.
10. The stock looks like a bargain now
You might expect Nvidia to be expensive, considering all the points I've mentioned above, but it's actually reasonably priced these days, trading for only 37 times forward earnings estimates. This is down from as much as 50 times just a few months ago.
And that's why right now is an ideal moment to get in on this top AI stock and, for the reasons above, hold on forever.
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