As we reach the halfway mark in 2025, it's clear that artificial intelligence (AI) remains a dominant theme in the market. This hasn't changed since the start of 2023, so some investors may be becoming a bit fatigued from all the AI-related hype. However, the reality is that there has never been a larger investment theme. Most AI hyperscalers are projecting record capital expenditures for 2025, primarily focused on expanding their cloud computing capacity for AI applications. That will help one company more than any other: Nvidia (NVDA -2.87%).
Nvidia has been the top AI stock pick for several years now, and it remains a strong choice for the future. But is it the best AI stock to buy in July?
Image source: Getty Images.
Data center growth isn't over
Nvidia manufactures graphics processing units (GPUs) -- chips that were originally designed to allow computers to generate high-quality graphics in video games. What allows them to do that so well is that these chips are parallel processors -- specifically suited to handling the types of computations that can easily be broken down into a large number of small tasks that can be handled simultaneously. Among the types of high-performance workloads that fit that particular bill are training and running AI models.
Nvidia has competitors in the data center GPU market, but none come close to the technology and supporting products that it offers. Most estimates peg its market share in that niche at around 90%, which is incredible considering the substantial amount of money spent on data centers.
Data center spending is also projected to skyrocket over the next few years.
During his keynote at Nvidia's 2025 GTC developer event, CEO Jensen Huang cited a third-party estimate that data center capital expenditures totaled $400 billion in 2024. Considering that Nvidia generated $115 billion in data center revenue during its fiscal 2025 (which encompassed most of 2024), it's clear that a solid chunk of that spending flowed its way. That same estimate also forecast that data center capital expenditures would rise to $1 trillion by 2028. If Nvidia can maintain its share of those expenditures, its revenue would more than double over that period.
That presents quite the bullish case for Nvidia stock, and even if the actual spending comes in below the $1 trillion mark, the chipmaker's growth should still be impressive.
AI computing capacity is far from being fully built out to the degree that the tech sector expects to need, which keeps the story behind Nvidia's stock intact. But is the stock priced at a reasonable level for new investors to capitalize on future growth?
Nvidia's stock trades in line with its peers
There's a common notion that Nvidia's stock has become quite expensive, but that's something investors need to get out of their heads. While it may have been true early on in the AI arms race, that's no longer the case. It trades today at 36 times forward earnings, which is right around where some of its big tech peers are trading -- and Nvidia is growing at a faster rate than they are.
NVDA PE Ratio (Forward) data by YCharts.
Microsoft and Amazon trade for 37 and 34 times forward earnings, respectively. Yet during their most recently reported quarters, Microsoft grew its revenue at a 13% pace, while Amazon grew at a 9% pace.
I'm not trying to argue that Nvidia is cheap, but its valuation is hovering around the same levels as its big tech peers. If its data center GPU sales grow at the rates that it expects, then the price today will be inconsequential years down the road. As a result, I'm confident in labeling Nvidia as the best AI stock to buy in July.
