Being the king of AI chip stocks, Nvidia (NASDAQ:NVDA) is surely a piping hot stock every long-term growth investor is itching to own. Surging nearly 250% in 2023, Nvidia stock is up more than 85% year-to-date, and showing not signs of slowing down anytime soon.

Of course, most of this drastic valuation increase has to do with Nvidia’s stranglehold on the high-performance computing market. The company’s AI semiconductors and GPUs are the dominant option for companies worldwide looking to create AI applications and run interfaces in this high-growth space. Until that changes, this rally really does look unstoppable.

Today, most sectors, whether it’s from in technology or elsewhere, are looking to pivot into AI or integrate AI into their processes. Analysts predict the AI market could reach $2 trillion by 2030, with plenty of value being accrued to the current dominant leader in this space.

Here’s why I think Nvidia’s current multiple has been validated by the market, and could actually represent a reasonable level, given the company’s noted ability to outperform in terms of its fundamentals.

Other Tech Companies Set Eyes on Nvidia AI Chips

Tech giants everywhere are collaborating to counter Nvidia’s AI dominance. This speaks to the company’s dominant position in this space, resulting in the formation of the Unified Acceleration Foundation (UXL). The coalition, including Intel (NASDAQ:INTC), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and others, aims to develop open-source software enabling AI code to run universally. This group targets a mature project phase by year-end.

After reaching a $2 trillion market cap, Nvidia stock is more driven to create AI-focused hardware that can be even better than its existing H100 and H200 chips. Despite Nvidia’s dominance with CUDA architecture, rivals are developing alternatives amid chip scarcity. UXL aims to create open-source solutions for AI and computing, seeking collaboration from chipmakers and cloud giants—Microsoft’s (NASDAQ:MSFT) rumored partnership with AMD (NASDAQ:AMD) is yet another example of competitive interests lining up against Nvidia stock.

I think this reality is largely bullish for Nvidia right now. It showcases the company’s dominance, and while other lower-priced options are necessary, means that Nvidia’s positioning in the high-performance computing space will be hard to challenge. I think Nvidia’s moat is only getting wider, with the release of its recent Blackwell GPU the latest innovation to turn heads.

NVDA Has Robust Financials

The previous year, Nvidia dominated the AI chip market with an estimated 90% share, leading to remarkable earnings. In its latest quarter (Q4 of fiscal 2024, ending in January), revenue surged by 265% to $22 billion, with operating income soaring by 983% to nearly $14 billion. This growth was fueled by a 409% increase in data center revenue, driven by AI GPU sales. 

The company’s free cash flow skyrocketed by 430% to over $27 billion, surpassing AMD’s $1 billion and Intel’s notable $14 billion. Despite the competition’s new GPU releases, Nvidia’s AI advantage likely propelled it ahead, ensuring robust cash reserves for continued innovation and market leadership. Moreover, the company now sits in third place in the race to be the world’s most valuable company, just behind Apple (NASDAQ:AAPL) and Microsoft. 

Despite this rapid growth, Nvidia’s stock has appreciated over the past year. Key valuation metrics like the price-earnings ratio and price-to-free-cash-flow ratio indicate favorable investment potential, coupled with its leading position in a thriving industry and substantial cash reserves.

Analysts Are Extremely Bullish

During an Nvidia event last week, Jensen Huang introduced Blackwell, Nvidia’s revolutionary GPU architecture, poised to redefine computing. Named after David Blackwell, this ambitious project marks a significant milestone in Silicon Valley’s history.

Nvidia exceeded Q4 earnings estimates, soaring revenue by 265% to $22.1 billion. The company anticipates 2024 sales of around $24 billion and an implied bottom line of $5.41 per share. Analyst Timothy Arcuri raised Nvidia’s price target to $1,100, citing an expected surge in demand.

Arcuri likened the framework to a centralized distribution system akin to an app store, foreseeing significant revenue potential from licensing Nvidia’s AI Enterprise software at $4,500 per GPU per year. He advocated for capitalizing on any short-term declines as buying opportunities.

NVDA Stock Still Looks Like a Buy

Nvidia has clearly emerged as a leading AI stock, and while some of the stock’s recent rise can be tied to hype, most of this company’s performance is fundamentals-based. Indeed, despite surging roughly more than three-fold over the past 18 months, this is a stock that still looks reasonably-valued based on its forward-looking prospects.

The data center and professional visualization segments saw remarkable sales growth of over 400% and 100% year-over-year. Additionally, Nvidia announced its inaugural quarterly dividend, offering investors promising fundamentals and growth prospects, particularly in the AI sector.

For long-term investors, Nvidia remains the go-to option in this space. I just don’t see that changing, for at least the next decade. Accordingly, I think investors would do well to consider this stock on dips moving forward.

On the date of publication, Chris MacDonald did not have (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.