3 Reasons to Buy Nvidia Stock Right Now (and 1 Reason to Sell)

If you want to bet on generative artificial intelligence (AI), there is still no better pick than Nvidia (NASDAQ: NVDA). The company dominates the market for cutting-edge AI data center chips. And unsurprisingly, shares have risen by a whopping 206% over the last 12 months alone. But can the bull run continue? Let’s look at three reasons to continue buying Nvidia stock and one reason why it might be time to sell.

1. Spectacular performance

While Nvidia’s parabolic stock price surge may look like a bubble, it isn’t. The rally is justified by equally impressive operational results. Fourth-quarter revenue surged 265% year over year to a record of $22.1 billion, driven by sales of cutting-edge AI hardware. Profitability is also exploding, with net income jumping almost ninefold to $12.3 billion.

Nvidia is enjoying a windfall from selling graphics processing units (GPUs) like the h200, which data center clients use to train and run their AI algorithms. This hardware is remarkably expensive, with the h100 costing as much as $30,000 per chip. The strong demand and pricing power allowed Nvidia to boast a software-like gross margin of 76% — up from 63.3% in the prior-year period.

2. Nvidia can keep the competition at bay

Nvidia’s astronomical margins are catching the attention of rivals like Advanced Micro Devices, which want to compete for a slice of the AI chip market, and customers like Alphabet or Amazon, aiming to reduce their reliance on third-party hardware by creating in-house custom chips. However, Nvidia is positioned to handle both long-term threats.

Nvidia stays ahead of the competition through constant innovation and a faster product update cycle. While rivals are trying to match its current flagship, the h100, Nvidia is already launching its replacement, the h200, which features more memory and faster algorithm training speeds.

Image source: Getty Images.

The company is also tackling the $30 billion custom chip opportunity with a new segment designed to help clients build AI chips specialized for specific use cases. Nvidia’s scale and design expertise could…

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