Nvidia (NVDA 1.55%) has been one the biggest success stories in the stock market. After having spent the first 20 years of its existence as a publicly traded company producing solid but not necessarily remarkable gains, the graphics processing unit pioneer finally hit its stride as the dual trends of blockchain technology and artificial intelligence powered demand of its chips. Now, Nvidia is the world's biggest company by market capitalization, and many investors believe the best is yet to come.
In this series on Nvidia for the Voyager Portfolio, you've already learned about the history behind the chipmaker and the financial success it has generated in recent years. Today, this final installment in the three-part series looks at Nvidia's growth plans and concludes with an explanation of why many investors don't need to worry about purchasing shares of the stock.
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The buildout of AI infrastructure continues
Nvidia has benefited greatly from voracious demand among hyperscalers and other tech first-adopters. These customers have done whatever it takes to obtain Nvidia chips, and the result has been huge gains in sales and profits for the chipmaker.
The question, though, is whether those trends will continue. Nvidia definitely believes so, as it points to three key platform shifts that look likely to provide ongoing demand for years to come. Accelerated computing has become a staple of the tech industry, with those who fail to make aggressive capital expenditures to get it risking falling behind their peers. Second, increasingly powerful AI models require more and more computing power, and Nvidia remains the primary source of the most effective semiconductors to power those models. And finally, agentic AI applications represent the next stage of AI evolution, as users voluntarily choose to give up their oversight role and turn over full responsibility for key business actions entirely to artificial intelligence.
In terms of capital, Nvidia believes that AI infrastructure spending will increase from current levels approaching $1 trillion to between $3 trillion and $4 trillion by 2030. Generative AI, agentic AI, robotics, and even claims about the end of Moore's law of computing are all drivers of potential growth for Nvidia. With generative AI token generation doubling every two months and users expanding into more real-world applications that Nvidia refers to as physical AI, the future still looks bright for the company.
NASDAQ: NVDA
Key Data Points
Surprise! You probably already own plenty of Nvidia
So given all the positive things going for Nvidia, it might not make much sense to learn that the Voyager Portfolio has no intention of adding the AI chipmaker's stock to its holdings. The reason isn't that the company is necessarily a poor investment. Rather, it's that most investors don't need to purchase individual shares of Nvidia because they already have plenty of exposure to the company's stock indirectly through mutual funds and ETFs.
Consider the following:
- If you own a total stock market index fund that holds shares of large, mid-sized, and small companies and is weighted by market capitalization, between 6% and 7% of your money is invested in Nvidia.
- For investors in funds that track the S&P 500 index, Nvidia has an even higher weighting of nearly 8%.
- Several tech-focused ETFs have even higher concentrations of Nvidia stock among their holdings. For instance, the Vanguard Information Technology ETF (VGT 1.96%) has over 17% of its assets in Nvidia. The Technology Select Sector SPDR ETF (XLK 1.84%) is close behind with 15%.
- Depending on their methodology, ETFs that concentrate on semiconductor stocks specifically can have even higher concentrations of Nvidia stock. For instance, the Van Eck Semiconductor ETF (SMH 3.22%) currently has over 18% of its assets invested in Nvidia.
Why the Voyager Portfolio isn't buying Nvidia
The purpose of the Voyager Portfolio is to highlight companies that investors don't know much about and are unlikely to own. Nvidia meets neither of those tests. That doesn't make it a bad investment, but it does make in unsuitable for this portfolio. And if you have a lot of your money in index mutual funds and ETFs, you might not need any more exposure to Nvidia either.
