Artificial intelligence (AI) stocks are back on track after a bumpy first half. These players, after two years of fueling S&P 500 gains, slipped a few months ago as President Trump announced plans to apply tariffs to imports. The concern was higher prices would have a negative impact on the entire economy and therefore weigh on growth players -- such as AI companies.
But in recent weeks, positive economic data and optimism that eventual tariffs would be set at manageable levels have buoyed sentiment and the stock market. Many growth stocks have led the way, including AI companies, and one in particular has stood out. This stock has soared 1,500% over the past five years and wowed investors with spectacular revenue growth and dominance in the AI market.
And my prediction is this momentum is far from over. In fact, I think this magnificent AI stock will skyrocket to new highs in July. Let's check out this stock to buy and hold.
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Powering the AI revolution
This player is none other than the company that's powered the AI revolution so far: Nvidia (NVDA 2.13%), the world's No. 1 designer of AI chips. This AI powerhouse has built a massive position in the AI market, selling its high-powered graphics processing units (GPUs) for the most important AI tasks as well as a full selection of products and services to meet any customer's AI needs. Nvidia's presence in the field is vast, including everything from platforms specifically serving industries to systems that will power and execute the AI of the future.
So far, Nvidia's AI strengths have helped it deliver double- and triple-digit revenue growth, and revenue has reached record highs -- in the recent full year it soared past $130 billion. And to make the picture even brighter, profit on sales has followed this pace, with Nvidia generally reporting gross margin of more than 70%.
Of course, worries about tariffs a few months ago hurt Nvidia just like other tech players. And on top of this, a U.S. ban on chip exports to China added to concerns. China represented 13% of Nvidia's revenue last year, and until just recently, it looked as if Nvidia's access to the market would be completely blocked for the foreseeable future. All of this hurt investor appetite for the stock.
As mentioned, optimism about ongoing trade talks and the general economic environment halted the negative momentum, offering Nvidia a chance to rebound. Investors also chose to focus on the fact that the U.S. is Nvidia's biggest market so even if sales to China didn't happen, the company still could generate impressive growth.
NASDAQ: NVDA
Key Data Points
A double-digit increase this year
All of this helped Nvidia stock to rebound, pushing the stock to a 28% increase so far this year. Now, let's consider my prediction. Why do I think Nvidia will reach new highs this month? First, Nvidia already has shown us its resilience. Even against a backdrop that still includes uncertainty -- import tariffs levels haven't yet been completely determined -- investors have returned to Nvidia.
The company's recent earnings report was solid, and messages from customers show they are continuing to spend big on AI. On top of this, Nvidia has launched plans to invest in U.S. manufacturing, something that could limit the impact of eventual import tariffs. All of this, along with Nvidia's ongoing commitment to innovation, helped the stock reach record highs this month and even lift Nvidia to $4 trillion in market cap. Nvidia's the first company to ever reach this level.
Reasons for more gains
Now, as July progresses, Nvidia could gather more positive momentum for a few reasons. First, the company just announced its return to the Chinese market -- the U.S. promised to grant Nvidia a license to export its H20 chip there, and deliveries are set to begin soon. This eliminates one of investors' biggest problems and opens the door to additional revenue growth.
Second, more progress on tariff negotiations could offer investors relief and prompt them to return to growth stocks. And finally, investors may aim to get in on Nvidia ahead of its next earnings report, scheduled for late August -- and any positive news from Nvidia customers during July earnings reports also may prompt investors to buy shares.
All of these factors could act as positive catalysts for Nvidia, and that's why I predict this magnificent stock will surge to new highs this month. And here's the best news of all: Even if I'm wrong, Nvidia has the products, processes, and innovation to set the stock up for an even bigger win over the long term.
