When investors think about artificial intelligence (AI) and the chips powering this technology, one company tends to dominate the conversation: Nvidia (NVDA 3.91%). It has become an undisputed barometer for AI adoption, riding the wave with its industry-leading GPUs and the sticky ecosystem of its CUDA software that keep developers in its orbit. Since the launch of ChatGPT about three years ago, Nvidia stock has surged nearly tenfold.

Here’s the twist: While Nvidia commands the spotlight today, it may be Taiwan Semiconductor Manufacturing (TSM 3.77%) that holds the real keys to growth as we look toward the next decade. Below, I’ll unpack why Taiwan Semi — or TSMC, as it’s often called — isn’t just riding the AI wave, but rather is building the foundation that brings the industry to life.

Taiwan Semi is the most influential foundry business on the planet

What makes Taiwan Semi so critical is its role as the backbone of the semiconductor ecosystem. Its foundry operations serve as the lifeblood of the industry, transforming complex chip designs into the physical processors that power myriad generative AI applications.

TSMC manufactures GPUs designed by Nvidia, CPUs for Advanced Micro Devices, and a widening range of custom silicon that cloud hyperscalers are using to optimize AI workloads more efficiently. Today, Taiwan Semi dominates the global foundry market with roughly 68% share of industry revenue — leaving rivals like Samsung Electronics in a distant second place with just 8%.

Why might TSMC stock outperform Nvidia or AMD?

One of the louder bear cases against Nvidia and AMD is the growing adoption of application-specific integrated circuits (ASICs). Hyperscalers are becoming highly motivated to design their own silicon — not only to fine-tune training performance for AI models, but also to reduce reliance on incumbents and push back against their pricing power.

The trend is already visible: Alphabet‘s Google is rolling out its tensor processing units (TPU), Amazon is deploying its Trainium and Inferentia chips, while Microsoft is experimenting with its own AI accelerators.

For Nvidia and AMD, this shift could translate into slower growth as spending that once flowed directly toward their GPUs is instead redirected to internally developed hardware. For these enterprises, vertical integration isn’t just a budgeting exercise; it’s a strategic hedge against dominating third-party suppliers.

For TSMC, however, these dynamics look quite different. Custom ASICs still need a manufacturer, and Taiwan Semi’s existing footprint in advanced fabrication services makes it a logical partner. In essence, TSMC is less vulnerable to which specific chip design gains momentum. Rather, the company is positioned as a neutral beneficiary riding the secular tailwinds fueling trillions of dollars being poured into AI infrastructure.

Is Taiwan Semi stock a good buy right now?

For investors, the central question boils down to durability in an increasingly competitive AI landscape. With its forward price-to-earnings (P/E) multiple peaking near 50 during the height of the AI frenzy, Nvidia is perhaps the most defining symbol of AI euphoria. Even after cooling off, the stock still trades at 38 times its forward earnings — meaningfully elevated over its three-year average.

NVDA PE Ratio (Forward) data by YCharts

While this premium underscores the market’s confidence, it also leaves little margin for error. Any slowdown in demand across compute and networking — or mounting competition from custom silicon — could put downward pressure on Nvidia’s lofty valuation multiple.

By contrast, TSMC’s valuation tells a different story. Despite being the underlying enabler of Nvidia, AMD, and hyperscalers alike, Taiwan Semi has not enjoyed the same degree of valuation expansion. To me, this suggests that the market has yet to fully price in TSMC’s critical role at the intersection of AI development, infrastructure, and manufacturing.

As AI infrastructure spending accelerates, Taiwan Semi is uniquely positioned as an agnostic winner, as the company stands to benefit regardless of which chip designer is featured most prominently in the spotlight. By 2030, TSMC won’t just be part of the AI story — it likely will be seen as a critical chapter supporting the entire ecosystem.

For long-term investors, this makes TSMC stock a no-brainer opportunity to buy and hold — one poised to outperform even today’s most hyped semiconductor names.

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. 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.

Crowd-pleasing growth isn’t new for Nvidia (NVDA -2.78%). But the AI and graphics chip company’s late-August update still managed to turn heads. Revenue rose sharply year over year, and the data center engine kept humming. Management also issued bullish guidance for the current quarter.

Sure, shares are down since the report. But remember: The growth stock is still up 28% year to date and is up more than 240% since the beginning of last year. With a run like this in a rearview mirror, Nvidia needs to deliver impressive numbers — and it did.

Recent results were strong and cash-rich

Nvidia’s momentum in AI infrastructure continued. Fiscal second-quarter revenue was $46.7 billion, up 56% year over year and 6% sequentially. Data center revenue hit $41.1 billion, up 56% year over year and 5% sequentially. Profitability remains best-in-class. Non-GAAP gross margin was 72.7%.

Under the hood, trends were “mixed” but healthy. I put “mixed” in quotes because investors are so used to impressive results from Nvidia that they often judge the company’s growth on sequential trends instead of year-over-year trends. On this front, there was one area where the trend wasn’t positive sequentially. Yes, Blackwell data center revenue grew 17% sequentially as the new platform ramps. But compute revenue dipped 1% sequentially because of a $4 billion reduction in H20 sales (more on this later). Meanwhile, networking jumped 46% as NVLink fabrics, InfiniBand, and Ethernet AI buildouts accelerated. That mix shift matters. It shows customers aren’t just buying GPUs — they’re building complete AI systems.

Cash generation remains a major part of the story. Free cash flow was $13.5 billion in the quarter and $39.6 billion for the first half of fiscal 2026. Cash, cash equivalents, and marketable securities ended Q2 at $56.8 billion. With this firepower, Nvidia returned $10.0 billion in Q2 through repurchases and dividends (primarily repurchases) and authorized an additional $60 billion for buybacks. Those are elite numbers for any large cap, and they give management flexibility to invest and to return capital.

Guidance and risks set the near-term tone

The near-term outlook reinforces the growth narrative. Management guided Q3 FY26 revenue to about $54 billion, plus or minus 2%. It also expects non-GAAP gross margin of roughly 73.5% and continues to see exit-year margins in the mid-70% range. Impressively, this guidance assumes zero H20 shipments to China. That last detail is key: There were no H20 sales to China in Q2, and management’s Q3 outlook again excludes them.

This creates a clean base case — growth without a China lift. If export restrictions ease or product roadmaps adapt, upside could emerge. If they don’t, the business still expects to grow through global demand for accelerated computing, the Blackwell ramp-up, and networking attached to larger AI clusters.

But things get a little less upbeat when we start talking about valuation. The stock’s current price-to-earnings multiple of 49 bakes in years of exceptional execution and continued growth, all from a base of extraordinary profit margins and a huge revenue base. Driving the point home about Nvidia’s overly rich valuation, consider that its market cap of about $4.2 trillion as of this writing gives the company a free cash flow yield of only about 2%. Given AI’s potential, living up to this valuation is certainly a possible outcome. But the valuation leaves less room for disappointments in supply, competitive responses from rivals, potential moves from its customers to de-risk their dependence on Nvidia, or a pause in AI spending.

So, should you buy the stock now?

Nvidia’s quarter checked the right boxes: rapid top-line growth, elite margins, massive free cash flow, and confident guidance. In addition, the balance sheet and repurchase firepower add support on pullbacks. But the risks arguably demand a lower valuation before investors should consider pulling the trigger. The risks are significant, including ongoing China restrictions, potential lumpiness as product cycles and customer mix shift, and a valuation that demands continued outperformance.

If you already own the stock with a long-term thesis, this report is good news and may help justify continuing holding shares. For new money, however, I’d scale in rather than chase — nibbling on volatility while letting the fundamentals and guidance do the talking over time.

Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

There are plenty of ways to play the artificial intelligence (AI) craze that’s dominating Wall Street these days. The tried-and-true stock is Nvidia (NVDA -2.96%), the designer of the advanced chips that are the tech world’s most popular choices for running large language models, generative AI, and other cutting-edge functions. Nvidia has made a lot of investors richer over the last few years, and has now grown to become the largest publicly traded company in the world, with a market capitalization approaching $4.4 trillion.

But another possible pick for tech sector investors is Intel (INTC -1.46%), which is more of a legacy computing company. Intel has lagged badly in the AI race, particularly with its foundry division, but it could benefit from the recent investment by the U.S. government, which has taken a 10% stake in the company.

Intel stock is up by 20% so far in 2025. Could it be a better AI investment from here than Nvidia?

The market position for Nvidia

Nvidia’s graphics processing units (GPUs) are the industry standard when it comes to providing the types of computing power required to teach AI models and deploy them in real-world applications. Its CUDA parallel computing platform lets developers write code and build applications on Nvidia GPUs. Every GPU is a parallel processor — capable of performing thousands of operations at once. The CUDA platform helps developers take certain types of computationally heavy processes and divide them into small individual threads that can be handled separately and simultaneously by such chips, thus getting more effectiveness out of them. The results are faster processing times and a more efficient use of computing resources.

That’s particularly important because it keeps hyperscalers and other developers locked into the Nvidia platform when they take their projects live — because CUDA can only be run on Nvidia’s chips. Its Hopper GPUs were the gold standard for GPUs, but now it’s selling its new Blackwell architecture chips, which deliver faster performance with lower power consumption. Blackwell sales generated $11 billion for Nvidia in the first quarter they were available — its fiscal 2025 Q4, which ended Jan. 26 — and boomed to $27 billion in the first quarter of its fiscal 2026. Blackwell sales rose another 17% to roughly $31.6 billion in fiscal Q2, which ended July 27. That was about 76% of the company’s data center sales. CEO Jensen Huang described demand for the Blackwell GPUs as “extraordinary.”

The market position for Intel

Intel, meanwhile, is the market leader in the data center central processing unit (CPU) space, but it’s facing serious challenges from rivals Advanced Micro Devices and Arm Holdings. Analysts with Mercury Research and International Data Corporation (IDC) predict that Intel’s market share will slip to 55% this year as AMD’s rises to 36%. Further, they project that Intel’s market share will fall below 50% by 2027, with AMD getting about 40% and Arm getting between 10% and 12% of the market.

Intel has also been attempting to build up its third-party foundry business, but that unit has struggled to find its footing. While Taiwan Semiconductor Manufacturing is still getting the lion’s share of the world’s chip fabrication business, Intel has had trouble landing clients. Management has announced that it’s shelving its plans to build chip foundries in Germany and Poland, and will slow the pace of construction at its foundry project in Ohio.

The company is investing more than $100 billion in its domestic foundry business, with its next plant expected to open this year in Arizona.

“We are also taking the actions needed to build a more financially disciplined foundry,” CEO Lip-Bu Tan said in the fiscal Q2 earnings press release. “It’s going to take time, but we see clear opportunities to enhance our competitive position, improve our profitability and create long-term shareholder value.”

What’s moving Intel stock now

While Intel is in a weaker financial position than Nvidia, some investors are speculating that it could be hitting a bottom — especially now that the U.S. government has taken a stake in the business. The Trump administration announced in August that it would purchase 433.3 million shares of Intel stock, taking a 9.9% stake in the company. The U.S. also gets a five-year warrant for $20 per share to take an additional 5% of shares should Intel not own a majority of its foundry business.

These moves are part of a push by Washington to encourage the development and manufacturing of high-end semiconductors in the U.S.

“As the only semiconductor company that does leading-edge logic R&D and manufacturing in the U.S., Intel is deeply committed to ensuring the world’s most advanced technologies are American made,” Tan said.

There’s still skepticism about Intel

Investors have already baked some high expectations into Intel’s stock price. Its forward price-to-earnings ratio, which a couple of years ago was roughly in line with Nvidia’s, has surged higher since then, and is now approaching 200, while Nvidia trades at a more reasonable 38.

NVDA PE Ratio (Forward) data by YCharts.

Intel’s stock hasn’t traded at levels like this in two decades. “The stock looks incredibly expensive here,” Wayne Kaufman, chief market analyst at Phoenix Financial Services, told Bloomberg. “That kind of multiple is a bet that the government will push Intel so hard on customers that it becomes a winner.”

Most analysts who revisited Intel following the Trump administration announcement reiterated their hold positions, but also are projecting significant downside for the stock. Bernstein’s Stacy Rasgon has a $21 12-month price target on Intel, which would amount to a roughly 12% downside, while TD Cowen’s Joshua Buchalter has a $20 price target.

Intel has had a net loss of $21 billion over its last four reported quarters, and I don’t see a path for the company to turn its finances around abruptly enough to justify its frothy forward P/E. While its still-downtrodden share price might represent a buying opportunity for investors, I think it’s a shaky bet at best considering that Intel is playing catch-up in AI.

Intel’s new government backing gives it a potential tailwind, but Nvidia’s leadership in GPUs, its CUDA platform, and its AI infrastructure make it a safer bet for long-term investors.

Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: short August 2025 $24 calls on Intel and short November 2025 $21 puts on Intel. The Motley Fool has a disclosure policy.

Semiconductor giant Nvidia (NVDA -0.85%) and artificial intelligence (AI) kingpin Palantir Technologies (PLTR -2.14%) are two of the most compelling technology stocks in the market. Nvidia harnessed demand for its graphics processing units (GPUs) to become the biggest company in the world, with a $4.4 trillion market capitalization. Palantir, meanwhile, is using its artificial intelligence platform to fundamentally change how governments and commercial businesses operate. The stock is up more than 500% in the last year and is the best-performing stock in the S&P 500.

In my view, you can’t go wrong with either of these tech stocks. But in a one-on-one matchup, which comes out on top?

Let’s look at both companies before rendering a verdict.

Nvidia

Nvidia’s GPUs are the engine behind this mammoth company. While they used to be best known for providing the graphics in computers, now GPUs are commonly used by companies that are building massive data centers to run artificial intelligence-powered platforms, including large language models needed for generative AI.

Nvidia has the lion’s share of this business, with Jon Peddie Research estimating that it has roughly 92% of the market share. And as Nvidia is expecting spending on data centers to accelerate from $250 billion in 2023 to $1 trillion annually by 2028, there’s a massive opportunity at hand.

In addition, major tech companies like Microsoft, Alphabet, and Meta Platforms are spending heavily and are even increasing their capital expenditure spending on their data centers. That’s why I’m expecting a solid earnings report from Nvidia when it reports its earnings for the current quarter, and why I’m expecting the stock to pop yet again after the numbers are released.

Palantir Technologies

Palantir got its start a little more than 20 years ago as a data mining company to provide real-time analytics and insights. As a government contractor, it’s long been valued by the military for its analytic technology that helps commanders make real-time decisions in battle. To the public eye, Palantir largely flew under the radar for years until in 2011, when it was credited for helping U.S. forces find and eliminate Sept. 11 mastermind Osama bin Laden.

Palantir works by drawing information from many sources, such as satellite imagery. By sifting through and digesting that information, it can perform instantaneous analysis that can help governments function. According to its CEO, Alex Karp, “Palantir was founded on the belief that the United States, its allies, and partners should harness the most advanced technical capabilities for their defense and prosperity.” 

As its capabilities expanded through the launch of its generative AI-powered Artificial Intelligence Platform (AIP), Palantir is quickly bringing in additional non-military government contracts. It has new contracts with the Federal Aviation Administration, the Centers for Disease Control and Prevention, the State Department, and the Internal Revenue Service. In the company’s just-released second quarter earnings report, U.S. government revenue increased 53% in the last year, reaching $426 million.

Commercial revenue is growing even faster, up 93% in the second quarter on a year-over-year basis and reaching $306 million. Clients include Walgreens Boots Alliance, AT&T, General Mills, United Airlines, and others, and Palantir is doing everything from making manufacturing more efficient to managing supply chains and helping companies scale.

Palantir closed 157 deals in the second quarter valued at more than $1 million, with 66 of them more than $5 million and 42 of them at least $10 million. As more companies bring Palantir’s platform online and share how they are improving their businesses, Palantir’s platform will become a must-have for many institutions.

The verdict

I’m not gonna lie. This is a tough one. I love both of these companies, and I think both are destined to increase.

But if I have to choose one, then the valuations of both companies will break the tie. At the time of this writing, Nvidia is richly valued both in its price-to-earnings (P/E) ratio of 59 and its forward P/E of 42, but Palantir comes in at an unhealthy 623 and 288, respectively.

The price-to-sales ratio, which compares market capitalization to revenue, is arguably an even more accurate measurement as both of these companies are pouring profits back into the business. And Nvidia is by far the strongest there, too.

PLTR PS Ratio data by YCharts

So, my winner in this hypothetical battle is Nvidia by a nose. But both stocks are great ones to have, and they’ll both anchor my portfolio for the foreseeable future.

Patrick Sanders has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. 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.

Investors may not realize it, but today (Aug. 14) is one of the most important days of the entire quarter. While earnings season is critical in helping investors learn about the operating health of America’s leading businesses, Form 13F filings, which are due today, are equally invaluable.

A 13F is a required filing due no later than 45 calendar days following the end to a quarter for institutional investors with at least $100 million in assets under management. It allows investors to track which stocks Wall Street’s smartest money managers purchased and sold in the latest quarter (in this instance, the June-ended quarter), as well as identify which trends have the attention of successful fund managers.

Although Warren Buffett is the stock market’s most followed billionaire investor, he’s far from the only billionaire known for their outsized investment returns. For instance, Coatue Management’s Philippe Laffont, who’s been a big investor of the artificial intelligence (AI) revolution, is known for spotting phenomenal deals hiding in plain sight.

Laffont’s approach to the evolution of AI has been particularly interesting. Specifically, he’s pared down his fund’s stake in the face of the AI movement, Nvidia (NVDA -0.83%), for eight straight quarters, and has been buying shares of another historically cheap AI stock hand over fist.

Coatue Management’s billionaire chief has sold 83% of his fund’s Nvidia stake

While some billionaire money managers bid adieu to AI-graphics processing unit (GPU) colossus Nvidia many quarters ago, Coatue Management billionaire boss has been paring down his fund’s stake with some degree of consistency for two full years. Accounting for Nvidia’s historic 10-for-1 stock split in June 2024, Laffont has overseen an 83% reduction in his fund’s position in this AI powerhouse:

• Q1 2023: 49,802,020 shares of Nvidia
• Q2 2023: 46,449,700 shares
• Q3 2023: 45,410,400 shares
• Q4 2023: 43,222,010 shares
• Q1 2024: 13,851,410 shares
• Q2 2024: 13,754,447 shares
• Q3 2024: 10,138,161 shares
• Q4 2024: 10,006,488 shares
• Q1 2025: 8,545,835 shares

With Coatue’s average top-20 position held for roughly 21 months, as of the end of March, it demonstrates that Laffont and his top advisors aren’t shy about locking in gains when presented with the opportunity. Nvidia shares catapulting more than twelvefold since the start of 2023 has given Coatue’s brightest investor plenty of reason to cash in his chips.

The concern with Philippe Laffont’s persistent selling spanning eight quarters is there may be more than profit-taking on his mind.

For instance, while the addressable opportunity for AI is sky-high, historical precedent shows that every next-big-thing trend for three decades has endured a bubble-bursting event early in its expansion. Investors have a tendency to overhype the utility and early stage adoption rates of new technologies, which eventually leads to these lofty expectations not being met. No company has been a more direct beneficiary of the evolution of AI than Nvidia, which suggests it would potentially be the hardest hit if the AI bubble were to burst.

Another possible consideration for Philippe Laffont is growing competition in the AI-GPU space. Make no mistake about it, Nvidia’s Hopper (H100) and Blackwell GPUs are at the top of the pedestal, in terms of compute ability. But this doesn’t mean Hopper and Blackwell won’t endure headwinds in the coming quarters and years.

Specifically, internal competition could prove to be a thorn in Nvidia’s side. Many of its leading customers by net sales are developing AI-GPUs and solutions for their data centers. Even though these chips are slower than Nvidia’s and they pose no external competitive threat, they’re considerably cheaper, more readily accessible, and capable of taking up valuable data-center real estate. In short, these chips could crush Nvidia’s pristine pricing power and gross margin.

Nvidia’s valuation is worrisome, as well. Historically, megacap companies have peaked with price-to-sales (P/S) ratios of roughly 30 to 40. Nvidia is tipping the scales at a P/S ratio of more than 30, as of the closing bell on Aug. 11.

Billionaire Philippe Laffont can’t stop buying this cash-rich AI stock

On the other end of the spectrum is a historically cheap and cash-rich artificial intelligence stock that Coatue Management’s billionaire chief can’t stop buying. I’m talking about China-based Alibaba Group (BABA 3.73%).

When 2024 came to a close, Alibaba was a relatively forgettable holding in Coatue’s portfolio, with just 192,728 shares held. But during the first quarter, Laffont came close to 20Xing this stake to 3,801,703 shares, based on the filed 13F.

While Alibaba’s growth ambitions very much rely on AI, this isn’t the company’s foundational operating segment responsible for most of its cash flow. Alibaba laid its roots through its e-commerce operations in China.

Whereas online retail sales have matured in the U.S., a burgeoning middle class in the world’s No. 2 economy by gross domestic product can generate high-octane e-commerce sales growth for the foreseeable future. Based on an analysis from DBS Treasures, Taobao and Tmall combine to account for a 41% share of China’s e-commerce space. These platforms should have little issue continuing to generate bountiful cash flow that Alibaba can redirect to faster-growing and/or higher-margin initiatives.

However, e-commerce isn’t the only arena that Alibaba Group is leading. According to estimates from tech analysis firm Canalys, Alibaba Cloud reined in 33% of Mainland China’s cloud infrastructure service spending during the first quarter, which was nearly double the 18% share Huawei Cloud earned as the No. 2 cloud infrastructure services provider.

Alibaba is aggressively incorporating generative AI solutions into its cloud platform and giving its clients access to the tools needed to build and train large language models. The expectation is that these AI solutions will enhance demand (and margins) for Alibaba Cloud.

Something else that’s likely attracted Laffont to Alibaba is the company’s capital-return program. It closed out fiscal 2025 (ended March 31) with $51.6 billion in cash, cash equivalents, and short-term investments, along with $7.4 billion in equity securities and $6 billion in restricted cash. When combined with the cash flow being generated from Alibaba’s numerous operating segments, there’s more than enough capital available for share repurchases and dividends.

The proverbial cherry on the sundae is that Alibaba Group stock is historically inexpensive at an estimated 11 times forward-year earnings. This is modestly lower than its average forward price-to-earnings (P/E) ratio over the past half-decade, and it stands out amid a historically pricey stock market.

Nvidia (NVDA 1.05%) is the world’s largest company, with a market cap around $4.4 trillion. It has reached this place thanks to its dominant position in the market for artificial intelligence (AI) chips that handle training and inference workloads in data centers.

The booming demand for AI chips has helped Nvidia deliver outstanding growth over the past several quarters. Its terrific growth has led to healthy market gains of 68% in the past year as of market close Aug. 4, despite a difficult start to 2025. In fact, Nvidia stock’s returns have easily outpaced the 18% gains clocked by the S&P 500 index during this same period.

Investors, however, may be wondering whether Nvidia has the ability to sustain its momentum in the coming year, especially considering its huge market cap and high valuation. In this article, I will take a closer look at Nvidia’s catalysts and see where the stock could be after a year.

These developments suggest Nvidia has room for more upside

Massive spending by cloud computing giants and governments around the globe has played a central role in driving Nvidia’s outstanding revenue and earnings growth in recent quarters. The good part is that Nvidia can continue counting on these avenues for growth.

For instance, the capital expenses of big tech players Microsoft, Amazon, Alphabet, and Meta Platforms are expected to hit $364 billion this year, up from an earlier estimate of $325 billion. All these companies are investing substantially in AI data center infrastructure to bring more AI-focused cloud solutions to customers.

The updated capital spending forecast points toward a 63% increase from last year’s outlay. A nice chunk of this spending can be expected to be directed toward chips that power AI infrastructure. McKinsey estimates that 60% of AI infrastructure spending is likely to be directed toward chips and computing hardware.

Nvidia’s addressable market, therefore, is likely to expand. Importantly, the company is the leading player in the AI chip market, with an estimated share of more than 90% at the end of last year.

Another factor that’s going to give Nvidia stock a nice boost is its access to the Chinese market. The company was frozen out of China in April of this year following export restrictions on the sales of its AI chips to that country. However, Nvidia recently pointed out that it has received assurances it will be able to sell its AI chips to Chinese customers once again.

The company has reportedly placed orders for 300,000 China-specific AI chips with its foundry partner Taiwan Semiconductor Manufacturing Company (TSMC). That’s in addition to the stockpile of 600,000 to 700,000 existing H20 AI processors that Nvidia is currently sitting on. Nvidia is expected to generate an estimated $15 billion in revenue from sales to Chinese customers in the second half of the year.

It is worth noting that Nvidia incurred a $4.5 billion charge in the first quarter of fiscal 2026 on account of restrictions on shipments to Chinese customers. The company also highlighted that its fiscal Q2 revenue would take an $8 billion hit because of those export restrictions. Meanwhile, the aggressive spending on AI infrastructure by governments across the globe is expected to boost Nvidia’s annual revenue by $10 billion to $15 billion.

As such, don’t be surprised to see Nvidia’s revenue in the current fiscal year (which will end in January 2026) coast past Wall Street’s expectations of $201 billion, which would translate into an increase of 54% from last year.

But what about the valuation?

Nvidia stock’s recent rally has brought its price-to-sales (P/S) multiple to 29 and the price-to-earnings (P/E) ratio to 56. The company needs to keep growing at a faster pace than the market’s expectations to justify its rich valuation.

The potential growth outlined above suggest it is indeed capable of doing so. The company’s planned re-entry into the Chinese market, along with the substantial increase in AI-related spending by big tech companies that have been buying Nvidia’s data center processors, could easily help it eclipse consensus expectations in the coming year.

The impressive growth Nvidia is expected to deliver is the reason its forward earnings multiples are much lower than the trailing ones.

NVDA PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio.

So, growth investors should still consider buying this AI stock, which the most optimistic analyst gives a price target of $250 for the next 12 months. That points toward potential gains of 39% from current levels, and there is a good chance that Nvidia could end up hitting that mark thanks to the healthy spending on AI infrastructure in the coming year.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. 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 (NVDA 3.56%) continues to captivate investors with its incredible growth story. Artificial intelligence (AI) has become a booming industry, but it may just be in its early stages. Nvidia is a key player in AI, and it has a lot to gain as the trend grows.

It doesn’t report earnings until Aug. 27, but Nvidia stock is climbing, riding the coattails of AI stocks that have been booming over the past few weeks. The market has rebounded and investors feel more confident in the economy, and several AI stocks impressed the market with their earnings last week. Microsoft joined Nvidia in the $4 trillion market cap club, and Meta Platforms, Amazon, and Apple all crushed expectations for second-quarter results.

It’s an exciting setup for what Nvidia might report in just a few weeks, and it bodes well for the future of AI and Nvidia’s business. Can investing $10,000 in Nvidia stock today make you a millionaire?

The king of the AI chip

Nvidia stock surged over the past few years as the dominant leader in chips that power AI. It has as much as 95% of the market, and it has relationships with most of the AI developers, like the tech stocks mentioned above, translating into long-term contracts, reliable revenue growth, and high barriers to entry for competitors. Although there are other companies that produce AI chips, Nvidia constantly upgrades its platform and offers even more powerful technology, ensuring ongoing partnerships with its clients and a widening moat.

What’s important to note about the success of its high-profile tech clients is that if they’re doing well, the likelihood is that Nvidia is also going to beat expectations. Management is forecasting revenue to increase 50% over last year in the 2026 fiscal second quarter, which will be reported on Aug. 27.

The data center opportunity

Data centers have been driving sales recently, and this is a high-opportunity space. AI companies need vast amounts of power to run the inference and reasoning that make their large language models (LLM) perform effectively, and they need Nvidia’s GPUs to process all of the raw data in massive data centers. Data center revenue increased 73% year over year in the 2026 fiscal first quarter (ended April 27), while total sales were up 69%.

Management said that the Blackwell architecture, a more powerful technology that replaced its previous Hopper technology, was it fastest-ever ramp-up, as it managed a sharp jump in demand for inference. There’s been tremendous development in AI factories, which require greater power, with 100 Nvidia-powered new factories in the first quarter, double from last year, and the average number of chips in each one also doubled from last year. It has projects coming up that need “tens of gigawatts” of Nvidia products on the horizon.

According to McKinsey, by 2030, companies are going to be spending nearly $7 trillion on data centers. Nvidia is positioned to benefit from that spending over the next five years.

It all may not be enough

Nvidia has an incredible long-term opportunity, and it’s still demonstrating the kind of growth young growth companies are trying to emulate. However, it may not be that stock that can turn $10,000 into $1 million. Turning $10,000 into $1 million implies 10,000% growth.

Based on current performance, you might think Nvidia can do that, because it’s still reporting the kind of growth a young tech stock might demonstrate. However, it’s already decelerating, and it’s expected to slow down further. It’s just simply too hard to increase percentage-wise from a base that’s as big as Nvidia’s is today. Even if in dollars it’s growing faster than smaller companies, its stock won’t be able to gain unless the percentage increases can match.

It’s very likely that Nvidia will cross the $5 trillion market cap threshold very soon, but it’s unlikely that it can increase 10,000%, even in the distant future.

I think Nvidia could be an excellent component of a millionaire-maker portfolio, but I wouldn’t expect a $10,000 investment in Nvidia stock to make you a millionaire on its own.

Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. 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.

Adam Spatacco has positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, Palantir Technologies, Taiwan Semiconductor Manufacturing, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.