Among investors looking to get a piece of the action in the artificial intelligence (AI) gold rush, Nvidia (NVDA 1.69%) has a top spot on nearly everyone's list. The graphics processing unit (GPU) powerhouse offers the most powerful products in their niche, and those chips are vital equipment in the AI supply chain.

I agree with this take, but I also know that Nvidia's stock is now priced for absolute perfection.

So is Nvidia safe to buy here, or is the price too high to pay for a company that has already been declared a winner?

Nvidia has vital technology for AI proliferation

Nvidia's primary products are GPUs. While these specialized chips were historically used to provide the processing power necessary to produce graphics for video games, their usage has expanded to perform other heavy computational tasks such as engineering simulations, cryptocurrency mining, data center processing, and now, AI model training.

Topping the list of Nvidia's most powerful GPUs is its H100, which is used heavily in data centers and is particularly strong in large language model training. Additionally, the company has other products for AI-powered video, image, and recommendation model training.

When data center operators purchase these GPUs, they don't just buy a couple and call it a day -- they purchase them by the thousands. For example, Amazon Web Services is building a new cluster that can connect up to 20,000 H100 GPUs. While these GPUs aren't available for public purchase, it's estimated these chips cost around $36,000.

If everyone is rushing to spin up their own data center to create an AI product, it's pretty easy to understand how Nvidia guided for 64% revenue growth in Q2. That helped send Nvidia's share up nearly 25% the day after its first-quarter earnings announcement, but it also comes at a price.

Nvidia's stock is valued at levels never seen before

Even before the Q1 report came out, Nvidia's stock had been having a fantastic year, up 109%. With the boost it received following its strong guidance, the stock is now up more than 160%. That's a particularly massive move for a company of its size: Nvidia's now knocking on the door of a $1 trillion market cap.

But to buy the stock now, investors have to accept a pretty pricey valuation.

NVDA PS Ratio Chart

NVDA PS Ratio data by YCharts.

Trading at 37 times sales, Nvidia has never been as highly valued as it is right now. However, this isn't the best metric to use to gauge the stock, as it considers trailing 12-month revenue when we already know that the year ahead will be much better for its business.

Wall Street analysts expect Nvidia's revenues to rise by 59% in fiscal 2024 (which ends January 2024) and another 28% in fiscal 2025. Should those projections prove accurate, that would give the company about $54.6 billion in revenue in fiscal 2025. That would value Nvidia's stock today at 17.5 times its fiscal 2025 sales.

However, Nvidia is a mature company, so its earnings metrics should be considered, too. If we speculate about Nvidia's fiscal 2025 price-to-earnings ratio based on its all-time best profit margin of 38%, that would give it a ratio of 46. That's a hefty valuation for any company, let alone one that can only achieve it if it doubles its revenue. And it would only be that low if it doesn't see any stock price appreciation from here.

So, with investors giving the market two years of free growth just to achieve an expensive but more reasonable valuation, I have to pass on Nvidia's stock now. While the company will undoubtedly benefit from the general growth of the AI trend, I'm not confident that the risk-reward benefit is there. Because of that, I think looking at other AI-centric stocks is a wise move.