2024 was the year investor interest in artificial intelligence (ai) stocks ignited. In the United Kingdom, the demand for NVIDIAShares of (NASDAQ:NVDA) in particular shot through the roof.
According to eToro, the number of British investors who own Nvidia shares more than double over the past year (up 108%). And just like that, the chipmaker jumped from sixth place on the list of stocks most owned by eToro customers in the UK to second.
Today, only tesla is most popular among the British clients of the trading platform.
But is the exaggeration justified? And should I buy Nvidia stock for my own portfolio?
Great growth
A quick look at brokers' earnings forecasts shows why the microchip maker is so popular among growth investors today.
| Financial year ending in January | Expected earnings per share | Annual growth | Price-earnings ratio (P/E) |
|---|---|---|---|
| 2025 | 295.01 US cents | 145% | 46.6 times |
| 2026 | 441.92 US cents | 50% | 31.2 times |
| 2027 | 550.41 US cents | 25% | 25 times |
Although earnings have been volatile in recent years, City believes Nvidia will deliver sustained earnings growth for at least the next three years. Some investors may be hopeful that the company, which has a strong track record of beating sales and earnings forecasts most recently, will surpass even these impressive estimates.
The company's market-leading graphics processing units (GPUs) are the cornerstone of the ai revolution. These high-power chips enable the processing of complex algorithms and large data sets, making them essential for training and deploying ai systems.
This indispensability drove revenue and gross profit 94% and 95% higher in the third quarter. This was yet another forecast. Once again, its Data Center division, which builds hardware for ai applications, stole the show. Sales here are up 112% year over year.
With ai still in its infancy, the theory is that Nvidia has considerable room to grow. But the rise of automatic thinking is not the only growth channel the company will enjoy. Others include the growth of online gaming, advances in autonomous vehicles, and advances in quantum computing.
Not without risk
That said, there are significant risks to Nvidia's earnings and, by extension, its stock price.
One that is gaining ground is the potential impact of new trade tariffs on chip exports. Rising tensions between China and the United States are particularly worrying. Late last year, this led Beijing to launch an investigation into Nvidia under antitrust laws.
While it is the market leader today, Nvidia also faces fiercer competition as global rivals ramp up their own ai offerings. amd, Huawei, Intel and Qualcomm They are just a handful of industry giants making big strides. Huawei reportedly plans to challenge Nvidia's dominance in China as trade frictions rise.
Other major dangers include supply chain issues, rising R&D costs, and future ai regulations in key markets.
A high growth stock
While not without risks, there is no doubt that Nvidia has significant long-term profit potential. And ultimately, I think the chipmaker deserves serious attention from growth investors today.
I myself already have exposure to the company through several exchange-traded funds (ETFs) that I have in my portfolio. So for now I'm happy to stay on the sidelines. However, I will consider opening a position in the business if its value drops.
