Key Points
In just a few years, Nvidia has vaulted to become the world's most valuable public company.
The chip designer is the go-to provider for a lot of hardware involved in training and running AI.
Many investors would consider Nvidia's stock expensive now based on its price-to-earnings ratio.
If we rewind five years, I'm sure nobody could have predicted where Nvidia (NASDAQ: NVDA) would be right now. It's the world's most valuable public company, with a market capitalization of over $4.3 trillion as of market opening on Jan. 21. Over the past five years, Nvidia's stock is up around 1,230%, meaning that a $1,000 investment then would be worth around $13,320 today.
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NVDA data by YCharts
What's behind Nvidia's historic run?
Many companies have seen their businesses turn around thanks to the current AI boom, but none more so than Nvidia. Historically, Nvidia's graphics processing units (GPUs) were used to power the visuals on video games. However, it turns out that they're also great for handling the workloads needed to train and run AI models.
Nvidia became the go-to source for a lot of AI hardware found inside data centers. This near-monopoly and demand have quite literally paid off for Nvidia, too. Five years ago, Nvidia's data center revenue was $4.8 billion. In its latest quarter, it was $51.2 billion.
With a price-to-earnings (P/E) ratio of around 44.1, Nvidia is one of the more expensive stocks on the market. However, investors have been willing to pay a premium for a company that has solidified itself as one of the most important ones in the world right now.
Should you buy stock in Nvidia right now?
Before you buy stock in Nvidia, consider this:
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.