Nvidia's (NVDA 1.69%) stock has shot up over 51,000% since it went public in 1999. And with its 45% rise year to date, it might feel like the best time to buy this tech stock is well past. However, Nvidia is a growth stock for a reason, with its crucial role in developing future technology likely to keep the company's shares rising for the long term.
Despite the significant rise in Nvidia's stock in 2023, its price is still 36% below the all-time high it hit in November 2021. The difference suggests there's still plenty of room for Nvidia's stock to grow for patient investors. Here's why it's not too late to buy shares in Nvidia.
Nvidia provides consistent long-term growth
Last year, Nvidia suffered one of its worst years as its stock plunged 50% throughout 2022. The declines came as macroeconomic headwinds reduced consumer demand for tech, with worldwide shipments for desktop graphics processing units (GPUs) plummeting by 42%. As Nvidia held an 88% market share in discrete GPUs in the third quarter of 2022, the decline in demand was detrimental to its financials.
In Q3 fiscal 2023, ended Oct. 30, 2022, Nvidia's revenue fell 16% year over year to $5.9 billion. The decline primarily came from its GPU-reliant gaming segment, which saw revenue decrease by 51%, earning $1.5 billion.
However, a challenging 2022 has barely been a blemish on Nvidia's long-term growth. The company's stock has climbed 266% over the last five years and 6,700% over the last decade. This stellar stock growth has come alongside a 129% rise in revenue since 2018, hitting $26.9 billion, and a 164% increase in operating income of $10 billion.
Nvidia's focus on PC gaming hurt its business in 2022 as nearly all consumer-reliant companies felt the strain from a burdened economy. However, other, more lucrative applications for its GPUs will likely see the company continue on its current growth trajectory for decades.
Nvidia has a future worth investing in
Before Nvidia, there was hardly a consumer GPU market to speak of yet. The company almost single-handedly founded the industry and took full advantage of the rise in popularity of PC gaming, which has seen millions of gamers worldwide custom-build their own computers and turn to Nvidia for graphics processing. The PC gaming market may be down, but the company's success in the industry has granted it the funds and power to pivot its business to more lucrative areas of tech.
In Q3 2023, Nvidia's data center segment brought in the most revenue, reporting growth of 30% and hitting $3.8 billion. The rise is largely owed to the booming cloud industry, valued at $368.97 billion in 2021, and expected to see a compound annual growth rate (CAGR) of 15.7% through 2030, according to Grand View Research. Data centers are crucial to that growth, with Nvidia's GPUs capable of running leading cloud platforms such as Amazon Web Services (AWS) and Microsoft's Azure.
Moreover, Nvidia's 45% stock rise since Jan. 1 has mainly been fueled by its prospects in artificial intelligence (AI). The launch of OpenAI's ChatGPT, a chatbot capable of producing human-like dialogue, in November 2022 shined a light on AI and its significant role in future technology. As Nvidia's GPUs have the power to run and develop AI software, investors have grown bullish over its future.
The AI market was worth $136.55 billion in 2022 and is projected to expand at a CAGR of 37.3% through 2030 (per Grand View Research). Considering Nvidia partnered with Azure in November to build a massive cloud AI computer, the company has made positive strides in the burgeoning industry.
Nvidia has enjoyed monster growth since its founding in 1993. However, its consistent growth over the long term and prospects in two quickly developing industries mean it's not at all too late to invest in its stock.
