Prediction: Nvidia Stock Will Beat the Market. Here's Why.

Howard Smith, The Motley Fool

Wed, Apr 16, 2025, 2:50 AM 4 min read

The scramble to build compute capacity for artificial intelligence (AI) models and training has enriched longtime Nvidia (NASDAQ: NVDA) shareholders. Large tech companies have been sharply increasing capital spending to build data centers and fill them with powerful servers, largely using Nvidia's products.

Retail investors and hedge fund managers alike piled into Nvidia shares over the past few years. The stock rocketed more than 400% over the last three years, even with it hovering about 25% off its record-high level.

I believe the AI leader will continue to beat the market going forward. Here are some reasons why.

Early use cases for AI have ranged from chatbots for internet searches and customer service to AI agents providing specialized services. Increasingly, businesses will be using the powerful technology to improve efficiency, target lucrative markets, and grow sales.

Manufacturers can reduce defective products, increase productivity, and save maintenance costs using AI. Nvidia and Alphabet's Google Cloud just announced a collaboration to bring agentic AI to enterprises that are aiming to have AI make decisions and perform tasks autonomously. It will use Nvidia's latest Blackwell platform on Google Distributed Cloud to effectively create on-site data centers.

Educators are also increasingly relying on AI to aid in teaching as well as research. Nvidia was targeting that segment with the release of its first desktop AI supercomputer last year. The company announced development of a compact desktop computer geared toward developers, researchers, and students. Nvidia has also launched desktop AI machines "to help marketers and other professionals leverage AI in their daily tasks," the company says.

Robots powered by AI along with driver assistance and self-driving software could well drive another major growth spurt for Nvidia. The company is already realizing sharply growing sales in its automotive and robotics segment.

Fourth-quarter revenue more than doubled year over year, and the segment contributed $1.7 billion to Nvidia's sales last fiscal year. Nvidia has business partnerships with multiple global automakers. Toyota plans to build its next-generation vehicles using Nvidia's software-defined platform for autonomous vehicles, for example.

Vehicle makers are including advanced driving assistance capabilities, and Nvidia will be one big beneficiary. Similarly, companies will utilize intelligent machines and robots increasingly across industries, including manufacturing, healthcare and logistics.