Despite its big gain on the year and recent 10-for-1 stock split, chipmaker Nvidia’s (NASDAQ:NVDA) shares have more room to run and remain a buy for investors looking to make money in this bull market.
Nvidia stock has enjoyed multiple catalysts this year — from blockbuster earnings and the stock split to the launch of new artificial intelligence microchips and achieving a $3 trillion market capitalization.
Now, Nvidia has a new catalyst as exchange-traded funds rebalance and add more of the stock to their holdings. The Technology Select Sector SPDR Fund (NYSEARCA:XLK), for example, is adding more than $10 billion worth of Nvidia shares as it rebalances at the end of the second quarter.
At the same time, 40 Wall Street analysts rate Nvidia stock a “strong buy” and see more upside ahead. There are no “sell” ratings on the stock despite the fact that the share price has risen 172% this year and nearly tripled in the last 12 months.
Huge Demand
The outperformance in Nvidia stock is being driven by huge global demand for its microchips and processors, which power AI applications and models.
The massive demand has translated into escalating sales and profits at Nvidia. The company most recently reported that its revenue in the first quarter of this year rose 268% from a year ago.
At the same time, the company’s profit was up 646% year-over-year.
Nvidia reported that sales at its data center unit, which includes it’s AI microchips and semiconductors, rose 427% from a year earlier to $22.6 billion. However, Nvidia isn’t a one-trick pony.
The company also highlighted strong sales of its networking parts that are used to connect clusters of microchips and processors. Nvidia said that it had $3.2 billion in networking revenue during Q1, which was three times more than sales recorded during the same period of 2023.
Chips used in video games saw their revenue rise 18% during the quarter to $2.65 billion.
New AI Chips
While Nvidia is getting a boost from all areas of its business, demand for its AI chips is what’s driving the company and its share price to new heights.
To keep pace with the soaring demand, and to keep competitors at bay, Nvidia has been rolling out new artificial intelligence products at a brisk clip. Currently, Nvidia controls about three-quarters (75%) of the worldwide market for AI chips and semiconductors.
In March of this year, Nvidia CEO Jensen Huang introduced new AI graphics processors called the “Blackwell” series. The first Blackwell chip called the “GB200″ will ship later this year.
However, Nvidia has already unveiled the next microchip that will eventually replace the Blackwell chip. Called “Rubin” chips, the successor to the Blackwell series will be Nvidia’s most powerful and energy efficient chip yet.
The Rubin chips are scheduled to ship in 2026 and highlight the speed at which Nvidia is updating its technology in order to stay a step ahead of rival chipmakers.
Buy Nvidia Stock
Nvidia has largely powered the current stock market rally that began in October 2022. The company’s shares have nearly tripled in the past year, undergone a mighty 10-for-1 stock split, and maintain a “strong buy” rating among analysts.
The company continues to have a huge growth opportunity ahead of it with its AI microchips and management is doing everything it can to capitalize and meet global demand. Nvidia remains the stock to own in this market. Its shares are a buy.
On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
