Artificial intelligence (AI) stocks have helped indexes soar in recent times as investors bet on this industry's ability to drive earnings growth and spark game-changing innovations. Companies developing tools for the AI infrastructure buildout and companies applying AI to their businesses have already started benefiting from this hot technology -- and investors have noticed.
One company, in particular, has emerged as a current and future winner. It saw its stock advance 171% last year, leading gains in the Dow Jones Industrial Average. And over the past five years, it's climbed a mind-boggling 1,800%. This performance has followed double-digit and triple-digit increases in the company's revenue quarter after quarter, thanks to demand for its AI products and services.
Moving forward, the good times may be far from over, so it's not too late to get in on this AI leader. Below, I'll look at the supercharged AI stock that Wall Street predicts may advance 30% from today's level.
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Quarterly revenue of more than $35 billion
This particular company wasn't always an AI giant -- it actually started out serving its technology to the video gaming market. But when it became clear that its top chips were ideal for many other uses, the company expanded its reach. And today, it's the world's No. 1 designer of graphics processing units (GPUs) for AI, and quarterly revenue, which totaled $7 billion three years ago, now tops $35 billion.
Seeing this success, investors have piled into this stock. The company is now almost synonymous with the words "artificial intelligence." I'm talking about AI powerhouse Nvidia (NVDA +1.63%).
NASDAQ: NVDA
Key Data Points
The one problem for Nvidia is that the stock's gains have pushed its valuation higher and have made some investors wonder exactly how long the stock's momentum can continue. Stocks don't rise nonstop forever, so it's logical to imagine Nvidia taking at least a pause at some point.
In recent days, investors have gotten a taste of this. Nvidia stock slipped last month after start-up DeepSeek said it trained its model with lower-performance Nvidia chips. This prompted investors to wonder whether top tech companies would scale back their spending on premium GPUs.
Wall Street's average price forecast
Still, Wall Street remains optimistic about Nvidia, with the average price forecast of about $172 calling for a 30% increase from today's level over the coming 12 months. Is this a realistic expectation?
First, it's important to note that, although the DeepSeek news weighed on Nvidia stock, it's unlikely this start-up's news actually will have any meaningful impact on the company's revenue. Nvidia's top customers -- from Meta Platforms to Alphabet -- have said in recent weeks that they plan on increasing their investments in AI. So it seems very unlikely they'll abandon Nvidia's newest GPUs in favor of older or lower-performing models.
Considering Nvidia's stock performance, we could see pullbacks from time to time as investors lock in profits -- and I think this has been the case in recent weeks. It's also true that Nvidia will face some competition from rivals or even in-house chips developed by companies such as Amazon. (Amazon Web Services has developed the Trainium chip for its most cost-conscious customers.)
But this is unlikely to weigh heavily on the top chip designer's market share. Nvidia is far ahead when it comes to GPU performance, and its commitment to innovation -- promising to update GPUs annually -- should keep it in the lead. Right now, Nvidia's launch of its Blackwell architecture is unfolding, and demand has far outstripped supply.
Chips for inferencing
On top of this, Nvidia should benefit from the next stages of AI development, which involve applying AI to real world problems. Nvidia sells the most powerful chips for inferencing -- and power here is crucial since inferencing involves the reasoning process AI models go through to do their jobs and answer complex problems. And the company also has created a software platform that supports companies as they build and use AI. All of this should keep growth booming at Nvidia.
This means that, though Nvidia shares may take a pause here and there, Wall Street's expectations for a double-digit gain in the coming year are reasonable. What's even more important is, over the long term, Nvidia has what it takes to continue dominating the AI market and therefore generating earnings growth. That's great news for investors who buy and hold this top stock today.
