Growth stocks have been winning bets over the past couple of years as the bull market roared higher. These players have led the S&P 500 to numerous records. Even after dipping earlier in the year on concerns about President Donald Trump's import tariff plan, growth stocks resumed their climb. This is as investors focused on a lower-interest-rate environment -- which is favorable for growth players -- and on the potential of artificial intelligence (AI) to supercharge the revenue of many growth companies.
It's impossible to predict whether growth stocks' momentum will continue for the months and quarters to come. But even if these players see the pace slow, they still represent a fantastic long-term investment. This is because, over a period of years, they have what it takes to significantly develop their businesses and boost your portfolio.
Here's the really good news: Even though growth stocks have climbed, that doesn't mean they all are overpriced. In fact, one of the world's top players still trades at a valuation that looks reasonable considering its long-term story. Let's check out the smartest growth stock to buy with $1,000 right now.
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A quadruple-digit gain
Without further ado, I'll reveal the identity of this fantastic growth buy: AI chip giant Nvidia (NVDA 2.95%). You might say: "Nvidia stock has already climbed in the quadruple-digits over the past three years, and revenue has hit record highs. Hasn't Nvidia reached its peak?"
Before answering that question, let's catch up on the Nvidia story so far. The chip designer wasn't always an AI giant. It was actually best known for serving the video gaming market in its early days -- that dates back to about 30 years ago. Although gaming is still part of Nvidia's business, the company has since expanded greatly. Today, Nvidia's graphics processing units (GPUs) serve a variety of markets from healthcare to automotive, and the central focus of these chips is the field of AI.
Nvidia hasn't just designed chips, though. It has added a range of related products and services to the mix, from enterprise software to networking tools. This has helped the company emerge as an AI giant, and its investment in innovation has kept it ahead of rivals. It offers the world's highest-performance chips, and customers aiming to win in AI know they must use these key tools.
NASDAQ: NVDA
Key Data Points
Revenue growth and strong gross margins
All this has driven double- and triple-digit revenue gains at Nvidia in recent years, as well as high profitability on sales. Nvidia has generally maintained gross margin of more than 70%.
Here's why I don't think Nvidia has reached its peak -- and that, instead, a lot more growth may be on the horizon. We're still in the infrastructure spending stage, and Nvidia has even predicted that this spending may soar to $4 trillion by 2030. As a provider of the GPUs powering AI, Nvidia is perfectly positioned to benefit from this. Today and beyond 2030, we should see growing use of AI, with the technology applied to a broad variety of real-world problems. Nvidia is needed here too, as its GPUs fuel the "thinking" process of large language models.
This suggests that Nvidia could benefit greatly throughout the phases of AI development and implementation. Meanwhile, the stock today trades for 43x forward earnings estimates. That level isn't a steal, but remains reasonable for a company with such a solid market position and strong revenue growth prospects. (With $1,000 or even less, you could pick up a few shares, since Nvidia trades for just under $200.)
So, even though Nvidia has delivered explosive growth over the past few years, the good times may continue well into the future. Even if Nvidia experiences a dip here and there, there's reason to believe that this AI giant stock will win over the long term, making it the smartest growth stock to get in on right now.
