The craze around artificial intelligence (AI) has sent shares of several companies soaring this year. Nvidia (NVDA 3.14%) is one of the foremost examples of this trend -- shares of the semiconductor giant have jumped a whopping 180% so far in 2023.

This terrific rally has made shares of Nvidia very expensive as the stock is now trading at 213 times trailing earnings and 39 times sales. Those multiples are significantly higher than Nvidia's already expensive five-year average P/E of 67 and sales multiple of 18. For some more perspective, the S&P 500 has a price-to-sales ratio of 2.45 and earnings multiple of 19.

So, it is safe to say that Nvidia stock is expensive by quite some margin. However, the forward earnings multiple of 52, based on estimates, suggests that the company's earnings are on track to grow at a rapid pace. Nvidia's forward earnings ratio also suggests that the stock is only a tad overpriced when compared to its five-year average forward earnings multiple of 41.

As a result, it makes sense for investors who are looking to take advantage of the AI boom to consider buying Nvidia even after its red-hot rally. A closer look at the company's prospects will make it clear that it is indeed worth the hype.

Nvidia's AI-driven growth is just getting started

The impact of AI on Nvidia's financial performance became very clear when the company released its fiscal 2024 first-quarter results last month. While revenue fell 13% year over year during the quarter that ended on April 30, to $7.2 billion, the company is estimating a 64% year-over-year jump in revenue in the current quarter, to $11 billion at the midpoint of its guidance range.

The data center business is the biggest reason Nvidia expects a solid acceleration in growth in the current quarter, as this segment is benefiting strongly from the adoption of generative AI.

On the company's latest conference call with analysts, Nvidia CFO Colette Kress said that companies are "racing to deploy" Nvidia's graphics processing units (GPUs) to meet growing AI demand. The demand for Nvidia's graphics cards is so strong that the company is reportedly struggling to keep up. Supply issues have reportedly led to a sharp jump in the prices of Nvidia's AI-capable GPUs, with the company reportedly commanding a premium of as much as 40% in China.

The impressive pricing power that Nvidia is enjoying can be attributed to the semiconductor giant's dominant position in the market for AI chips. New Street Research estimates that Nvidia controls a whopping 95% of the market for GPUs that can be deployed for machine learning in data centers. Meanwhile, HSBC estimates that Nvidia enjoys a 90% share of processors used for generative AI applications.

All this indicates that Nvidia is crushing it in the market for AI chips, and it could win big from the same in the long run as the demand for these chips is set to boom even more. Nvidia looks to be at the beginning of a massive growth curve thanks to AI, which should help the company justify its expensive valuation by helping it sustain outstanding growth in the long run.

The stock is built for more upside

Wall Street analysts expect Nvidia  to sustain momentum over the next five years, which is not surprising given the huge opportunity in AI chips discussed above.

Bank of America global research analyst Vivek Arya projects that the adoption of generative AI services could help Nvidia increase its revenue at an annual pace of 25% through 2027. The company is expected to finish fiscal 2024 (which will end in January 2024) with revenue of of almost $40 billion. Assuming it does clock 25% annual revenue growth through the end of 2027 (which will coincide with its fiscal 2028), its top line could jump to nearly $100 billion at the end of the forecast period.

For comparison, Nvidia delivered $27 billion in revenue in fiscal 2023, suggesting that its revenue could nearly quadruple over a five-year period. The stock sports a five-year average sales multiple of 18. While that's rich, it wouldn't be surprising to see Nvidia maintain a similar multiple after five years given its tremendous AI opportunity.

If it keeps that multiple and has $100 billion sales, it would have a market cap of $1.8 trillion. That would be 80% higher than Nvidia's current market cap.

Investors who are on the sidelines about Nvidia and are looking to add a top AI stock to their portfolios should consider buying this high-flying chipmaker.