The "Magnificent Seven" is an elite club: Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Tesla, and Nvidia.
And last year, the group dominated the stock market, with all of them up by a minimum of 49%, leaving the benchmark S&P 500 index in the dust.
NVDA Total Return Level data by YCharts
Yet, I think there is one company that stands out in this illustrious list: Nvidia. Here's why.
Nvidia's sales are soaring
If I were to distill my bullish thesis on Nvidia down to one sentence, it would be this: Nvidia is the stock that has benefited the most from the artificial intelligence (AI) revolution so far, and there's every reason to think it will continue to do so for a long time to come.
NASDAQ: NVDA
Key Data Points
The speed and scale of AI adoption can be challenging to grasp, so let's review a couple of graphics that may help. Let's start with a tweet from Visual Capitalist that shows where we are when it comes to AI's innovation cycle:
Many experts have predictions focused on the impact of AI 🌐
-- Visual Capitalist (@VisualCap) January 14, 2024
Our new report from the 2024 Global Forecast Series dives into AI and other technological events.
Join VC+ for the full report with 100+ quoted predictions to help you stay ahead: https://t.co/2fLYLIHyme#GFS2024 pic.twitter.com/f2mmBn4TxP
In short, experts think AI is just getting off the ground -- perhaps only 10% to 25% of the way to its full potential. That would put it in a similar position to where the internet stood in 1995 or where smartphone adoption was in 2007 -- understood by most people, but still a long way from where it will end up.
Crucially for investors, there remains time to find the companies that will benefit from the AI revolution and add them to portfolios. Whenever there is a new technological innovation, it takes time to determine how big the wave will be, and which companies will benefit the most.
Clearly, Nvidia is one of the companies that will massively benefit from the AI revolution. Want to know why? Look at this chart:
NVDA Revenue (TTM) data by YCharts.
This chart shows Nvidia's trailing 12-month revenue (blue line) and Wall Street's revenue estimates for its next fiscal year (yellow line). Note how sharply the yellow line is rising. That's because analysts can't seem to boost their predictions for Nvidia fast enough. Each time it delivered a quarterly report in 2023, management's revenue guidance figures came in far above what analysts had expected, and the analysts had to race to keep up.
Meanwhile, reported revenue is soaring, too. Nvidia's trailing 12-month revenue nearly doubled in 2023, from a low of $25.9 billion to $44.9 billion.
Clearly, the company's sales are on fire, and it's all down to AI. Nvidia makes graphics processing units (GPUs) -- and this type of hardware is key to making AI possible. GPUs provide the fast parallel-processing computing power that allows developers to train large language models and other AI systems on vast amounts of data. That's what gives AI the ability to "know" things. Without massive numbers of the GPUs that Nvidia produces, AI algorithms would learn more slowly and be far less "smart."
Many of the world's largest companies are racing to add hundreds of thousands of Nvidia's AI chips to their tech infrastructure. Magnificent Seven peers such as Microsoft, Meta Platforms, and Tesla are buying its chips at a blistering pace.
Nevertheless, just because the AI revolution is here to stay doesn't mean there won't be bumps in the road. Because of that, Nvidia isn't a stock to trade -- it's a stock to buy and hold for at least a decade.
Nvidia investors should remember at least one thing moving forward: A relatively modest investment -- made at the start of a key innovation cycle -- can help set up an individual investor for life ... if they're willing to buy and hold.
