Nvidia (NVDA 1.53%) has been the unquestioned leader in GPU chips for artificial intelligence (AI) data centers since the start of the AI boom in early 2023.
Perhaps the most impressive feat is that Nvidia, with $187 billion in trailing-12-month sales, continues to grow far faster than competitors such as Advanced Micro Devices and Broadcom, both of which are much smaller.
There's no doubt that competition will continue coming for Nvidia's crown. However, that shouldn't scare investors away from the AI leader. If you have $200 to invest, you can confidently buy Nvidia stock and hold it for the long term. Here is why.
Image source: Nvidia.
Entering a new era with Nvidia Rubin
AI companies have primarily used Nvidia's GPU chips to train AI models over the past several years. But AI inference is becoming a bigger piece of the puzzle. Training AI involves feeding it data to make it intelligent, while inference consists of applying AI to real-world tasks.
Demand for inference is growing rapidly, with agentic AI and other complex use cases placing greater strain on AI chip memory. Memory strain causes slower response times in AI apps. A recent report indicated that OpenAI had grown frustrated with slow response times from Nvidia's GPUs and was allegedly exploring alternatives to supply 10% of its inference needs.
Nvidia's upcoming Rubin chip platform, the successor to Blackwell, features Inference Context Memory Storage (ICMS). The technology acts as a specialized memory layer between a GPU's fast (but small) memory and larger (but slower) external storage. The ICMS will store KV caches containing data generated as AI models work through prompts.
Rubin represents a crucial step forward for Nvidia as AI computing increasingly shifts toward inference.
The future is bright, and AI is only getting started
OpenAI's reported dissatisfaction is a shot across Nvidia's bow, but it's still unlikely that a competitor will surpass it any time soon. Nvidia's entrenched hardware footprint is a tremendous competitive advantage and would take time and consistent effort to replace. It is still the gold standard.
NASDAQ: NVDA
Key Data Points
Plus, Nvidia isn't sitting still. The company recently announced a $20 billion deal to purchase the assets of Groq, a start-up specializing in AI inference chip technology. Nvidia entered a non-exclusive licensing agreement with Groq for its inference technology and hired Groq's CEO and key personnel to help develop it.
Nvidia clearly recognizes the need to continue innovating, and that bodes well for the stock's long-term prospects. Remember, next-level AI applications such as AI agents are only just getting started, and there are still enormous future opportunities in AI technologies, ranging from self-driving vehicles to humanoid robotics.
Analysts estimate that Nvidia's earnings will grow at an annualized rate of 37% over the long term. The stock trades at 46 times earnings, a valuation that leaves ample room for investment returns if Nvidia continues to perform at a high level as AI grows and matures over the next five years and beyond.
