If you had bought Nvidia (NVDA 0.04%) stock 10 years ago, your investment would be up 26,760% at the time of writing. It can be painful to imagine what could have been, but you don't make money in the stock market by looking at the past.
There's only one thing you need to ask about a company whose stock is hitting new highs. Is there still a large enough opportunity for the business to keep growing revenue? Considering what is happening on the ground in the data center market, Nvidia still has solid growth prospects that can deliver excellent returns for investors.
Nvidia dominates the market for data center chips, but the most important reason to buy the stock is that more money continues going to new data center buildouts. There is a long-term transition underway in building new data centers that are equipped for accelerated computing using Nvidia's graphics processing units (GPUs), and this shift is just getting started.
Investment in data centers is accelerating
The demand is so great for these chips that Nvidia's own customers are designing their own chips for artificial intelligence (AI) workloads, but it's still not slowing Nvidia down. Its revenue grew 56% year over year last quarter. There are many use cases for AI, which will benefit Nvidia and competing chip companies.
Importantly, there is an expanding addressable market for Nvidia. More data center projects are starting in several states across the U.S., which is only fueling the demand for more chips. For example, Google recently announced plans to invest $4 billion on a new data center and other cloud infrastructure in Arkansas. In Wisconsin, Microsoft is building two data centers that will cost $7 billion.
NASDAQ: NVDA
Key Data Points
Altogether, the "Magnificent Seven" (excluding Nvidia) spent $312 billion in capital expenditures over the past year, which includes spending for data centers. A good portion of future spending will find its way to Nvidia, whose GPUs fill the countless rows of servers that are installed in these massive facilities.
Nvidia sees up to $4 trillion in data center spending by 2030, yet its stock trades at just 30 times next year's earnings estimate. This valuation is attractive for a company that dominates the data center chip market and generates a high margin on every chip sold. Investors should expect the share price to climb higher over the next year and beyond.
