Have $200? This AI Stock is Worth Buying and Holding for the Future.

Nvidia (NVDA +0.80%) has maintained its dominance in GPU chips for artificial intelligence (AI) data centers since the AI surge began in early 2023.

One of the most noteworthy aspects is that with trailing 12-month sales at $187 billion, Nvidia is outpacing its closest rivals, Advanced Micro Devices and Broadcom, both of which are significantly smaller.

While it’s clear that Nvidia will face ongoing competition for its top spot, investors seem undeterred. With $200 to invest, buying Nvidia stock and holding it long-term appears to be a sound decision. Here’s the reasoning:

Entering a new era with Nvidia Rubin

For the past few years, AI companies have largely relied on Nvidia’s GPU chips to train their AI models. However, AI inference is gaining importance. Training AI means feeding it data for learning, whereas inference involves applying AI to real-world situations.

The demand for inference is skyrocketing as agent AI and other complex tasks put considerable pressure on the memory of AI chips. This memory pressure can lead to delays in AI app responsiveness. A recent report indicated that OpenAI has expressed frustration over slow response times from Nvidia GPUs and is looking into alternatives to cover 10% of its inference needs.

Nvidia’s new Rubin chip platform, set to replace Blackwell, introduces inference context memory storage (ICMS). This innovation serves as a specialized memory layer that bridges the gap between the GPU’s fast but limited memory and slower, larger external storage. ICMS keeps a KV cache containing data generated when the AI model responds to prompts.

The Rubin platform is a significant advancement for Nvidia as the focus in AI computing shifts further toward inference.

The future looks bright, and AI is just beginning

Despite OpenAI’s criticisms of Nvidia, it’s still improbable that competitors will catch up anytime soon. Nvidia’s well-established hardware presence offers a substantial competitive edge, which won’t be easy to displace. Basically, it remains the benchmark.

Moreover, Nvidia is actively pursuing innovation. The company has announced plans to acquire the assets of Groq, a startup focused on AI inference chip technology, for $20 billion. Nvidia has secured a non-exclusive license agreement for inference technology with Groq and brought on board Groq’s CEO and key team members for its development.

This strategic move reflects Nvidia’s acknowledgment of the necessity for ongoing innovation, which is a promising sign for the long-term outlook of its stock. It’s worth noting that advanced AI applications, like AI agents, are still just getting started, and there’s tremendous potential ahead, from self-driving vehicles to humanoid robots.

Analysts predict Nvidia’s revenue will grow at an annual rate of 37% in the long term. Currently, the company has a P/E ratio of 46x, and this valuation leaves ample opportunity for investment returns if Nvidia maintains its strong performance as AI continues to evolve over the next five years.