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Nvidia's performance has been incredible.
Its future isn't guaranteed to be golden, but signs point that way.
Its chips are in great demand for data centers, in large part to power AI technology.
I feel like it's such a cliché to offer up Nvidia (NASDAQ: NVDA) as my favorite stock to buy right now. However, there are just too many great reasons anyone might consider it for their portfolio.
For starters, there's the company's past performance, which has featured torrid growth. The stock's average annual rate of growth over the past decade has been about 76%. (Over the past three years, it's been 146% -- plus, the stock is up 51% year to date as I write this.) The stock recently became the first to hit the $5 trillion mark, then dropped back below that mark.
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Image source: Getty Images.
Of course, past performance in no way guarantees future performance, but Nvidia's future still looks quite promising. And remarkably, after all that torrid growth, its stock doesn't seem wildly overvalued by some metrics. Its recent forward-looking price-to-earnings ratio (P/E) of 31.5 is well below its five-year average of 38.5. Its price-to-sales ratio, though, recently 30.2, is well above the stock's five-year average of 23.8 -- and both those numbers are quite steep.
Why am I bullish? Once known as a gaming chip company, Nvidia is now heavily involved in the artificial intelligence (AI) boom and cranking out graphics processing units (GPUs) for data centers. CEO Jensen Huang recently said that the company has $500 billion worth of orders for its Blackwell and Rubin chips through 2026. To put that in context, Nvidia's total revenue over the past year is $165 billion.
Nvidia regularly outperforms expectations, showing that it can pivot as needed to capitalize on opportunities.
Yes, Nvidia's valuation can be viewed as overvalued or undervalued, depending on which numbers you look at and how bullish you are regarding the continued growth of AI and rising demand for data centers to power its uses. And the company does have competition -- some of its big tech customers are working on developing chips and software in-house -- but I still think that long-term investors can do well with Nvidia. It's my favorite stock to buy right now.
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Selena Maranjian has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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