The evidence is piling up that investors should buy Nvidia (NVDA 1.53%) ahead of 2026. Let's look at three reasons to own the stock heading into the new year.
1. Nvidia is showing no let-up in growth
Nvidia's stock has been the biggest artificial intelligence (AI) winner over the past few years because of the incredible growth the company has achieved. Last quarter, its revenue soared 62% to a whopping $57 billion. Even more impressive is that its revenue is up more than threefold over the past two years and nearly tenfold in the past three years.
By and large, Nvidia's growth is a direct result of the ongoing AI infrastructure buildout. Approximately 90% of its revenue comes from its data center segment, where its graphics processing units (GPUs) are used to help train large language models (LLMs) and run AI inference. Notably, its data center networking portfolio has been growing even faster than its chips, with revenue surging 162% last quarter to $8.2 billion.
Image source: Getty Images.
As such, Nvidia's growth is directly tied to the ongoing data center buildout. On that end, the company is in good shape to keep seeing revenue climb. The big three cloud computing companies -- Amazon, Microsoft, and Alphabet -- have all indicated that they will spend aggressively next year on AI infrastructure to try to keep up with rising demand. All three companies have indicated they are currently capacity-constrained. Meanwhile, Oracle is building out massive data centers for OpenAI as part of a $300 billion cloud deal, and other companies are also spending big on their own AI infrastructure, including Meta Platforms and Elon Musk's xAI. In addition, countries are also building huge data centers in a sovereign AI push.
Nvidia also recently got more good news when the Trump administration gave the company approval to sell its H200 chip to certain Chinese commercial customers. The administration had earlier banned all GPU sales to China, including its H20 chip designed specifically for the country, but now it will be allowed to sell its even more powerful H200 chip.
NASDAQ: NVDA
Key Data Points
2. Nvidia's business has a wide moat
What makes Nvidia the primary beneficiary of the AI infrastructure buildout is the wide moat it has crafted around its chips. This stems largely from its CUDA software platform, which it created as a way for developers to easily program its chips for tasks outside their original purpose of speeding up graphics rendering in video games. While adoption in other markets was slow, the company smartly pushed CUDA into universities and research labs that were doing the early work on AI. This created a generation of programmers trained on its platform, and most foundational AI code and libraries were being written on its software and optimized for its GPUs.
The company didn't stop there, though. It also created a proprietary interconnect system to quickly transfer data between its chips, essentially letting them act as one powerful unit. This heavily dissuades customers from mixing and matching chips within an AI cluster, as in order to optimize the performance of its GPUs, customers also need its NvLink system. This has helped Nvidia capture an approximately 90% market share in the GPU data center space.
While custom AI ASICs (application-specific integrated circuits) are gaining popularity, these are pre-programmed chips hardwired for specific tasks and lack the flexibility of general-purpose GPUs. The ability of GPUs to be programmed in a quickly changing tech landscape is ultimately a huge advantage, and why these chips will remain a data center mainstay.
3. Nvidia stock still has a relatively inexpensive valuation
Despite Nvidia's huge growth over the years and strong prospects, the stock is still relatively cheap. It trades at a forward price-to-earnings (P/E) ratio of under 24 times 2026 analyst estimates and a price/earnings-to-growth (PEG) ratio of less than 0.7 times. Positive PEGs under 1 times are typically considered undervalued.
Given the growth in front of the stock and its attractive valuation, the evidence suggests Nvidia is a stock to own in 2026.
