NVIDIA (NASDAQ:NVDA) stock has returned a whopping 145% over the one-year period through Friday, sprinting by the S&P 500's 17.7% return.

Moreover, shares of the graphics processing unit (GPU) specialist have skyrocketed 1,030% over the three-year period through Friday. This dwarfs the broader market's 42.7% return and crushes the stock returns of its primary peers/rivals, including Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD), or AMD, over this period.

While NVIDIA's a big company -- its $149.2 billion market cap makes its stock the 32nd largest on the S&P 500 index -- there are good reasons to believe that the party will continue for some time.

Here are 10 reasons to buy NVIDIA stock and hold on for the long ride.

Outline of a human head containing a semiconductor chip with a background of the digits 0 and 1 -- concept for artificial intelligence.

Image source: Getty.

1. It's led by a founder

NVIDIA CEO Jensen Huang cofounded the company in 1993, after earning a master's degree in electrical engineering from Stanford and working as a microprocessor designer at AMD. A growing number of studies show that founder-led companies tend to outperform in the stock market. 

2. Its founder-CEO has a lot of skin in the game

Huang owned 1,562,172 million shares of NVIDIA as of his most recent reporting date, Sept. 19. This stake is worth a cool $391.3 million based on the stock's closing price on March 16 of $250.48 per share. So, when you invest in NVIDIA, you know its CEO's interest is aligned with your interests.

3. It's an attractive place for top tech talent to work

Top tech talent is the lifeblood of companies such as NVIDIA, and with many leading tech players based in Silicon Valley, they're vying for much of the same talent. NVIDIA's employees, past and present, consider it a great place to work, according to its Glassdoor ratings: 

Company Overall Glassdoor Rating  CEO Approval* Positive Business Outlook
NVIDIA 4.4 96%  87%
Intel 3.8 67%  54%
AMD 3.6 91%  63%

Data source: Glassdoor. Data as of March 18. 

4. It's at the center of numerous massive tech and entertainment trends

NVIDIA is at the center of many trends that promise to be anywhere from huge to massive. Here are the main ones (there is overlap between AI and many of these): 

  • Computer gaming/esports
  • Artificial intelligence (AI)
  • Driverless vehicles 
  • Cloud computing
  • High-performance computing (HPC)
  • Virtual reality (VR)
  • Cryptocurrency/blockchain
  • Drones 
  • Industrial robots/factory automation
  • Smart cities

5. Its GPU-based approach to deep learning is the favored AI tech

NVIDIA's GPU-based approach to accelerating deep learning is being rapidly adopted by enterprise companies -- including all the major internet companies and cloud-service providers -- for use in their data centers, by automakers and others for use in their driverless vehicle initiatives, and by a host of other companies for a wide range of applications. (Deep learning is a category of AI that trains a machine to make inferences from data in a way similar to how humans do.) While NVIDIA has a big lead, investors need to watch for signs that competing AI techs are gaining traction, and monitor Intel's progress in its plan to enter NVIDIA's GPU-based AI turf.  

AI is in the early innings of revolutionizing nearly every industry. While statistics vary widely by source, Statista forecast that the global AI market grew about 175% year over year to $2.4 billion in 2017, and projects it to balloon tenfold between 2017 and 2022. 

6. It's the leading maker of graphics cards for the booming computer gaming market

NVIDIA dominates the market for supplying discrete GPUs, or graphics cards, for computer gaming. In the fourth quarter of 2017, the company held a 66.3% share of the market, compared with AMD's 33.7% share, according to Jon Peddie Research. This bodes well for NVIDA, as the computer gaming market is growing fast, driven largely by the exploding popularity of esports and the increasing quality of video games. 

7. It has strong traction in the burgeoning driverless vehicle space

Many industry watchers expect fully autonomous vehicles to be legal in the United States as early as 2020 or 2021. The transitioning of the world's transportation fleet from being driven by humans and fueled by petroleum to driving itself and being powered by electricity promises to be one of the biggest tech trends of the century -- and NVIDIA is on track to capitalize on it. More than 320 car and truck makers and others are developing with NVIDIA's autonomous vehicle AI computing platform, DRIVE PX. Moreover, NVIDIA has partnerships in this space with Toyota, Tesla, Mercedes-Benz, Volkswagen, Chinese tech giant Baidu, and ride-hailing leader Uber, among others. 

8. Its financial performance is powerful 

For fiscal-year 2018, which ended Jan. 28, NVIDIA's revenue jumped 41% to $9.71 billion, GAAP earnings per share (EPS) soared 88% to $4.82, adjusted EPS surged 61% to $4.92, and free cash flow (FCF) rocketed 94% to $2.91 billion. Here's the powerful three-year financial performance picture:

NVDA Revenue (TTM) Chart

Data by YCharts.

9. It consistently beats Wall Street's earnings estimates

In recent years, NVIDIA has been beating -- and often crushing -- Wall Street's earnings estimates. In the last four quarters, NVIDIA has beat Wall Street's EPS estimates by an average of 32%: 20% (Q1), 31% (Q2), 42% (Q3), and 34% (Q4). 

10. Its valuation probably isn't as pricey as it seems at first glance

The fact that NVIDIA consistently beats the Street's expectations suggests this dynamic will continue. If this premise proves true, its stock's valuation of 34.5 times forward earnings won't be as pricey as it appears to be at first glance. Analyst expect the company's EPS to grow 35.1% this year and just 9.5% over the next five years. If NVIDIA remains top dog in the AI chip space for at least the next few years, look for it to breeze by that 9.5% projection.

 

Beth McKenna owns shares of NVIDIA. The Motley Fool owns shares of and recommends Baidu, NVIDIA, and Tesla. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.