Growth investors everywhere are searching for the next big thing in artificial intelligence (AI). And while there are many great AI stocks to choose from, most have extremely expensive valuations. Palantir Technologies stock, for example, trades at more than 100 times sales. Even a smaller player like SoundHound AI -- which sports a market cap of just $5 billion -- has stock trading at more than 30 times sales.
In such an environment, choosing where to invest your hard-earned capital can be difficult. Luckily, there's one AI stock that has the odds stacked in its favor. This promising stock is surprisingly cheap, too.
Image source: Getty Images.
Nvidia remains one of the best AI stocks today
If you're familiar with the AI space, you're likely well acquainted with Nvidia (NVDA -0.01%). Nvidia is a favorite among AI investors for a few reasons. The company dominates the GPU market for AI applications. Nearly every AI technology imaginable runs on these specialized chips. And per the latest estimates, Nvidia maintains a market share of 90% or more.
Because Nvidia's chips are designed to be customer agnostic -- that is, they can be programmed for use in just about any application, even competing applications -- Nvidia is positioned to win whether SoundHound or Palantir end up winning their particular niches. In many ways, as long as Nvidia maintains its leading market share, the company is akin to betting on AI spending itself. With most estimates calling for 30% or greater annual spending growth over the next decade, this is an enviable position to be in.
Nvidia stock may look expensive at 30 times sales. But with sales growing so quickly, shares trade at just 22 times forward sales. Add a few more years of breakneck sales growth, and suddenly shares look surprisingly cheap.
The catch is that your holding period needs to be long enough to account for this up-front premium. If you're looking to bet on AI for the long term, however, Nvidia remains a top-tier option.
