Here's Why Nvidia's Stock Could Still Go Higher This Year

Nvidia (NASDAQ: NVDA) generated impressive, life-changing returns in just a fairly short time. In five years, the stock has grown by close to 2,800%. To put that in terms of real dollars, a $5,000 investment in the company back then would be worth more than $140,000 right now.

But investors may be concerned that the tech stock is too expensive to still be a good buy today. While a massive return over the next five years may be unlikely, there's a strong bullish case to be made for buying Nvidia stock today. Here's why it could have plenty of upside in both the short term and the long term.

"Insane" demand for new chips could set up strong guidance

Nvidia is constantly innovating and coming out with new chips that can help companies train and develop artificial intelligence (AI) models. It enjoys a dominant market position today and is building on that position as it looks to ensure its lead remains strong.

The company's new Blackwell AI chips cost up to $40,000 per unit. Despite the high price, CEO Jensen Huang says demand for them has been "insane." In what may be the clearest sign that the AI boom remains alive and well, Huang told CNBC in an interview recently that companies remain eager to get the latest and greatest chips: "Everybody wants to have the most and everybody wants to be first."

For investors, that's a great sign that the business is still experiencing high demand for its chips. When Nvidia reported earnings in August, its stock didn't take off despite hitting $30 billion in quarterly revenue for the quarter ending in July and experiencing 122% growth. Expectations may have been a bit too high.

But if demand for the Blackwell chips is as strong as Huang is suggesting it is, the company may offer upgraded and stronger guidance for future quarters. That could be just what's needed to send the stock higher this year. Nvidia's next earnings report is expected to come out in November.

In the long run, there may be even more upside

For long-term investors, there's an even easier case to make as to why it may not be too late to invest in Nvidia. The AI revolution is in its early stages with a lot of businesses developing their own AI models and integrating new technologies into their workflows.

Analysts from Grand View Research project that by the end of the decade, the global AI chip market could be worth more than $323 billion as it expands at a compounded annual growth rate of 28.9% until then.

With Nvidia being the leader in the AI chip market, it stands to benefit from all that future growth. Even despite the stock's massive gains in recent years, it's trading at a forward price-to-earnings multiple of 34, which may not seem all that expensive for the fast-growing business. Its price-to-earnings-growth ratio of 1 suggests it's a cheap buy even when you factor in the five-year growth that analysts project for the business.

Is Nvidia's stock a no-brainer buy?

There are AI stocks out there that are cheaper than Nvidia, but as the leader in AI chips, it offers investors a fair bit of safety in the long run, knowing they're going with the big brand and top company in the AI chip market. Even if it doesn't generate four-figure returns in the next five years, it still has the potential to be a solid market-beating investment, making Nvidia one of the safer growth stocks you can add to your portfolio today.

Should you invest $1,000 in Nvidia right now?

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.