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Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Nvidia, Vanguard S&P 500 ETF, and Vanguard Total Stock Market ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Nvidia (NASDAQ:NVDA) launched 30 years ago with a simple vision: Its founders wanted the gaming and multimedia markets to experience the power of 3D graphics. A few years later, the company revolutionized the computer industry by inventing the first graphics processing unit (GPU).
Nvidia has had a long history of innovation since developing the GPU. Today, the semiconductor company develops and manufactures processors that are vital for data centers, cloud-based platforms, gaming, automotive, and artificial intelligence (AI).
The company's latest innovation is accelerated computing. Nvidia pioneered the technology, which uses specialized hardware to significantly speed up work. It often uses parallel processing to bundle recurring tasks.
The company believes accelerated computing can help unlock the power of AI. Nvidia's GPUs power the AI software behind OpenAI's wildly popular ChatGPT program and other AI innovations.
Fellow tech behemoth Microsoft (NASDAQ:MSFT) is investing billions of dollars in OpenAI to help take the technology to the next level. Others in the tech sector have followed Microsoft's lead and are investing heavily in AI start-ups and related infrastructure.
This investment spending is driving strong demand for Nvidia's processors. It certainly has been the case in 2024, as its AI-related chip sales have soared.
Accelerated computing is also helping rev Nvidia's profit growth, boosting the company's stock price and making it a potentially excellent long-term investment. Here's a step-by-step guide on buying Nvidia shares and some factors to consider before investing in the technology stock. But first, let's talk about what exactly Nvidia does to make it such a valuable company.
While Nvidia stock has soared in popularity as a way to gain AI exposure, many investors aren't sure what the company does. Maybe they've heard of GPUs, maybe they've heard of data centers, or maybe they've heard of AI. However, the exact nature of Nvidia's business may remain shrouded in mystery.
Before an investor clicks the buy button, one of the best ways to ensure investing success is to thoroughly understand the company's business. Since Nvidia's business is more than just AI, it's worth taking a closer look at what exactly it does.
The company organizes its business into two segments: compute & networking and graphics. The compute and networking segment accounts for the lion's share of Nvidia's business -- 78% of revenue and more than 97% of operating income for fiscal 2024 -- and is where Nvidia's AI exposure is located.
The company's accelerated computing platforms, for example, help data centers manage the extraordinary computing demands of AI. According to the company, its data center solutions "can scale to tens of thousands of GPU-accelerated servers interconnected to function as a single giant computer."
Rounding out the company's business, the graphics segment comprises the GPUs provided for varying markets, including gaming, professional visualizations (workstations), and automotive. For fiscal 2024, these three markets represented 17%, 3%, and 2% of revenue, respectively.
While not as robust as the company's data center business, the gaming and automotive markets have represented some aspects of AI. Nvidia's GPUs, for example, are used in various types of autonomous vehicles.
Nvidia is a so-called fabless chip designer, relying on third-party foundries to manufacture and package physical products based on its semiconductor designs. By designing industry-leading GPUs, Nvidia is at the forefront of the AI explosion.
Its platforms are indispensable for data centers attempting to manage the tremendous computing demands associated with large language models and other types of generative AI. Simply put, Nvidia is a leader in sophisticated accelerated computing. And for applications such as machine learning and AI, in general, accelerated computing is essential.
You can buy shares of Nvidia in any brokerage account. If you still need to open one, these are some of the best-rated brokers and trading platforms. Here's a step-by-step guide to buying Nvidia stock using the five-star-rated platform Fidelity.
Fidelity makes it easy to buy stocks. Its website even offers a video tutorial and step-by-step guide. Here's a screenshot of how to place a stock trade via Fidelity.
On this page, fill in all the relevant information, including:
Once you complete the order page, click the "Place Order" button at the bottom and become a Nvidia shareholder.
Before investing in Nvidia, you must determine whether its stock is a good one for you to buy. Here are some reasons you might consider investing in Nvidia stock:
Conversely, here are some reasons you might decide Nvidia isn't the right stock for you:
Profit growth helps drive stock price appreciation over the longer term, making it an ideal area for beginning investors to focus on before buying shares of any company. Nvidia is spectacularly profitable.
The company generated more than $30 billion in revenue in its 2025 fiscal second quarter, up an eye-popping 122% year over year and 15% from the previous quarter. Data center revenue drove its results ($26.3 billion in the quarter, up 16% sequentially and 154% year over year).
Nvidia produced almost $17 billion of net income in the quarter. That was up a staggering 168% from the previous year and 12% from the previous quarter. The company's robust profit growth has been a major catalyst for its soaring stock price:
Nvidia also generates lots of cash. In its 2025 fiscal second quarter, the company produced $14.5 billion in cash from operations and $13.5 billion in free cash flow.
The cash flow gave it the funds to invest in continued innovation while returning money to shareholders through dividends and share repurchases ($15.4 billion in the first half of the year). Even with the hefty cash returns, it ended the period with a cash-rich balance sheet ($26.3 billion of net cash).
Nvidia believes its investments in accelerated computing position it to capitalize on the explosive growth in AI. This catalyst could continue driving Nvidia's profits higher.
Nvidia initiated a dividend in 2012 and steadily increased its payout for the first several years after declaring its initial dividend. While the company had stopped raising its payout in more recent years, that came to an abrupt end in 2024 when it declared a monster 150% raise.
However, the company still offered a very low dividend yield in late 2024 (0.03% compared to less than 1.5% for the S&P 500). Although Nvidia doesn't pay a big dividend, it returns significant cash to investors through share repurchases. In 2024, the company authorized a massive $25 billion increase to its share repurchase program, adding to the almost $4 billion remaining under its prior authorization.
Instead of actively buying shares of Nvidia directly, you can passively invest in the technology company through a fund holding its shares. Nvidia is one of the world's largest companies by market capitalization and is a widely held stock.
Nvidia is in several stock market indexes, including the S&P 500 and Nasdaq Composite index. As a result, index funds and exchange-traded funds (ETFs) that benchmark their returns against those indexes hold Nvidia stock. According to ETF.com, 525 ETFs held 2.3 billion shares of Nvidia as of late 2024. The ETFs with the most shares were:
Given its large market cap, Nvidia is among the top five holdings of the five largest ETFs by assets under management (AUM). The SPDR S&P 500 ETF Trust (NYSEMKT:SPY) owns the most shares and has a meaningful portfolio weighting among the biggest ETFs. That makes it a solid option for investors seeking exposure to Nvidia.
Several other ETFs offer greater exposure to Nvidia stock. The VanEck Semiconductor ETF (NASDAQ:SMH) is a reasonably large ETF with a higher portfolio weighting to Nvidia (almost 20% in late 2024), making it a possible alternative for investors seeking passive exposure to the stock.
Nvidia completed a 10-for-1 stock split in June 2024, one of several it has completed throughout its history:
Nvidia's June 2024 stock split brought its share price from a pre-split level of more than $1,200 to around $120 a share (and it was around $125 a share in early October). That's a much more accessible level for investors. However, if the share price continues to rise, Nvidia might join the list of companies with an upcoming stock split once again.
Nvidia's continued innovation has helped drive the company's profit and stock price higher over the years. The company's investments in accelerated computing positioned it to capitalize on the enormous potential of AI, igniting its earnings and stock price. Nvidia believes it's still in the early innings of the AI boom, which could make it a great long-term investment.
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