Businesses around the world are contemplating how artificial intelligence (AI) can help make their enterprises better and more efficient. Nvidia (NVDA -1.99%) wants to be the engine that powers the proliferation of the use of AI.

The semiconductor chip technology company just released its fiscal 2024 first-quarter earnings report for the period ended April 30, 2023, and it blew out its own most recent revenue guidance. The update showed that the data center and gaming segments are both back in solid growth mode for Nvidia. With the additional growth expected from its AI platform, Nvidia looks to be a stock to own even after a big run in 2023.

AI tailwinds

Nvidia reported revenue of $7.2 billion compared to the $6.5 billion guidance it provided for the quarterly period. That upside surprise was due to a boost in the data center segment from the "AI rush" as well as the second consecutive quarterly rise in gaming chip revenue.

Graph of Nvidia quarterly revenue by segment.

Data source: Nvidia. Chart by author.

After being cut in half last year, Nvidia stock is back trading at the level it stood at in early 2022. Much of the recent move was driven by investor excitement surrounding the potential market for Nvidia's AI offerings

But that market is already bringing real revenue for Nvidia. CEO Jensen Huang summed it up, stating, "A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service, and business process."

The company provided revenue guidance of an astounding $11 billion for its fiscal 2024 second quarter, representing a jump of 53% sequentially from the first quarter. There should be more to come, as it also just announced it was integrating its AI enterprise software platform with Microsoft's Azure machine learning software.

Its overall business is also growing more profitable. The company expects its gross margin in the current quarter to be about 400 basis points higher than the just-reported quarter as it approaches 70%. 

Data from Nvidia's fiscal 2024 first-quarter report.

Nvidia expects revenue to jump another 50% in the current quarter.

An aggressive investment

Even considering Nvidia's current success -- and future promise -- it remains a high-risk investment. The stock dropped 50% in 2022 partly because investors had pushed it to a high valuation based on the hope of future growth in several of its segments. Yet autonomous driving and AI use cases still seemed fairly far away, and the stock experienced what seemed like a reasonable correction. 

But the introduction of ChatGPT brought AI to the forefront for many consumers and investors. With the timeline for explosive growth from that business seemingly accelerated, Nvidia's stock erased all of its previous declines. Now the company is already starting to see dramatic revenue growth. 

Investors still shouldn't ignore the stock's rich valuation, though. After its earnings report, it was trading at an enormous price-to-earnings (P/E) ratio of over 215 based on last year's earnings. Even after non-GAAP adjustments, the P/E hovers around 110. That means there is already plenty of future earnings growth built into the share price. And the stock's market cap jumped above $900 billion after the company's earnings report. 

But for those patient enough to hold for years, if not decades, the stock could still be a good buy. Based on the company's latest update, it seems the optimism revolving around the company and its stock still might be justified, resulting in market-beating returns. The best approach may be to add investments in Nvidia over time to build a full position, as corrections in the price are likely to occur again.