Key insights
- This article presents an opinion piece recommending Nvidia as a growth stock investment, despite market volatility. It highlights Nvidia's dominance in the AI GPU market and its potential to capitalize on the projected $3-4 trillion AI infrastructure spending by 2030. The author also points to Nvidia's expansion into the agentic AI market with its Vera CPU as a significant future growth driver. The positive outlook on a major tech company, particularly in the AI space, suggests a potentially bullish signal for the tech sector and broader US equity market.
Is now a good time to invest in stocks? Some might hesitate to do so due to the significant volatility equity markets have experienced this year and the possibility of even more troubles ahead. Others would argue that the stock market is overvalued right now and advocate waiting for a pullback. However, even in this environment, there are attractive companies to be had that can perform well over the long run. Here are two of the best, in my view: Nvidia (NVDA 5.58%) and Netflix (NFLX 0.31%). For those with $500 to spare (that isn't put away for emergencies), here is why it'd be wise to invest that money in these stocks.
Nvidia's run over the past five years has been nothing short of exceptional. The company's dominance in the GPU (Graphics Processing Unit) market -- the workhorse of artificial intelligence (AI) training -- has catapulted it to the largest corporation by market cap. Some may feel that Nvidia has peaked and that there isn't much upside left for the company. In fact, despite its most recent financial results being strong -- Nvidia beat expectations on the top and bottom lines -- Nvidia's shares dropped.
However, my view is that the semiconductor specialist remains one of the best growth stocks to invest in. Here are three reasons why. First, demand for the company's products should remain high through the medium term. Hyperscalers (and plenty of other companies) are pouring fortunes into AI infrastructure. This spending could reach between $3 trillion and $4 trillion by the end of the decade, according to Nvidia.
Nvidia's best-in-class GPUs and CUDA ecosystem, which give it a wide moat, position it well to capitalize on this. Second, as we experience a shift to agentic AI -- with AI agents running on CPUs (Central Processing Units) -- Nvidia also sees a large market to tap into. The company thinks it could be worth $200 billion. Nvidia is working hard to tap into this opportunity. Notably, it is launching its Vera CPU to compete in this market. Nvidia does not need to dominate it the way it does the GPU space.
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But progress in this space could meaningfully move the needle over the next few years. Lastly, Nvidia's shares look surprisingly affordable. The company is trading at 25.6x forward earnings. And for reference, the average forward P/E (price-to-earnings) for information technology stocks is currently 25.9. Nvidia looks more than reasonably valued at current levels, and the stock could, once again, beat the market over the next five years. Investors can purchase two of its shares for $500 right now.
Netflix has had a rough go of it this year, partly due to poor guidance following its first-quarter earnings update. The stock has declined 10% to date. Can it bounce back? Historically, it's been hard to keep Netflix down for too long. Post-earnings dips are often followed by sustained runs, especially for investors who hang onto its shares for long enough, say, several years. True, a lot has changed for Netflix over the past decade. It now has far more competition in the streaming market.
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However, Netflix also has attractive opportunities and a wide moat that could allow it to deliver solid returns to patient investors. Streaming may seem ubiquitous, but analysts project it will continue to expand at least through the medium term.
For its part, Netflix is seeking to enter niches of the field where it lags significantly behind some competitors. The list includes long-form video podcasts and sports streaming, areas where, if it can make solid headway, it could boost viewership and engagement on its platform. Further, Netflix's core advantage remains its vast ecosystem, which provides it with ample data to guide its content strategy.
Netflix reportedly has industry-leading churn rates -- despite raising its prices pretty regularly -- which speaks volumes about the value its customers place on the platform. All of those points indicate that Netflix is well-positioned to continue riding the streaming tailwind for a while and deliver excellent returns, especially for investors who buy its shares on the dip. Investors can get six of the company's shares at current levels with some change to spare.