Few anticipated the rapid adoption of artificial intelligence infrastructure last year. The release of generative AI chatbot ChatGPT showed the potential for large language models but it was the enterprise market’s embrace of the architecture that allowed Nvidia (NASDAQ:NVDA) to sweep to a 240% gain last year. 

That’s spilling over into 2024 as we’re only two weeks into the new year and NVDA stock is already up 14%. By being able to supply the market with virtually all the AI chips demanded catapulted Nvidia to the forefront of the market.

There appears to be no let up in demand for Nvidia chips making it appear to be a clear winner again this year. Yet despite the gains being racked up again so far this year by its stock, is the chipmaker still worth buying at these prices? Let’s take a closer look to see if you should be a buyer here.

The Power of AI

Demand for Nvidia’s AI chips exploded last year. Housed within the chip maker’s data center segment, investors can see the extraordinary rise in sales that occurred last year.

	FY23 Q4	FY24 Q1	FY24 Q2	FY24 Q3
Data Center Revenue $	$3,833	$4,284	$10,323	$14,514
% Change Y-Y	10.8%	14.2%	171.2%	278.7%

There is no let-up in sight. Nvidia forecasts total revenue for the fourth quarter will be around $20 billion, more than triple the $6 billion it posted last year. Data center revenue represents about 80% of the total so that could put Q4 sales at around $16 billion, or 340% higher than last year. The exponential ramp-up seems unstoppable.

Reuters just reported that India data center operator Yotta will place within the next year a $500 million order for Nvidia’s AI chips. It brings its total order book with the chip maker to $1 billion. The new order will be for 16,000 of Nvidia’s H100 and GH200 AI chips. Yotta bought a similar number of chips last year that will be delivered by July.

The order comes on top of two other agreements Indian conglomerates signed with Nvidia last September. Reliance Industries and Tata Group will have Nvidia-built cloud infrastructure, LLMs and generative AI applications for them.

These are important new avenues for growth because of the technology trade restrictions imposed on China by the Biden administration. Nvidia CFO Collete Kress previously said she had no clarity on how that would affect the company’s business.

China currently represents 20% to 25% of data center revenue. It was seen as a major growth channel for AI chips. India may now become the new driver for expansion.

Potential Headwinds

It’s not all blue skies for Nvidia. The competition is heating up and could steal some of the chip maker’s market. Both Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) have developed their own AI chips. They will reportedly price them at significant discounts to NVDA chips. That could have potential cost-conscious customers changing their purchase plans.

Also Nvidia’s rate of growth will slow. The sequential growth rate in AI chip sales is already slowing. The new fiscal year will see the year-over-year growth rate rapidly decelerate as it laps the big gains it just made. That could cause the market to course correct just as fast on its outlook for NVDA stock.

Nvidia also relies almost wholly on Taiwan Semiconductor Manufacturing (NYSE:TSM) for its chips. Nvidia designs the chips but outsources actual production. Others use TSM for their chips too. Although the foundry is increasing capacity to keep up with demand, bottlenecks could arise. 

There’s also the potential for China to invade Taiwan. Chairman Xi said in a New Year’s address that Taiwan “reunification” with China is inevitable. Any hostilities could severely disrupt Nvidia’s supply channel. 

Buy now or wait?

I’ve previously warned investors should use caution buying NVDA stock. I’ve said they’re priced for perfection. With growing competition and the need for AI to actually pay off on its promise, investors might want to wait for better prices. 

Now there’s nothing worse than a bear who suddenly jumps on the bandwagon. It often marks the top. Yet I’ve come to the belief that long-term buy-and-hold investors should not fear buying in now.

The AI market is only just getting started and there is plenty of room for several players. The tailwinds outrank the headwinds and investors should feel comfortable buying Nvidia stock today.

On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.