Prediction: Buying Nvidia Today Could Set You Up for Life

Nvidia (NVDA) has already shown its wealth-building prowess. The world's top chip designer has delivered a 1,000% gain over the past three years thanks to its dominance in the artificial intelligence (AI) market. This leadership has helped Nvidia generate outsize earnings growth, with revenue and profit climbing in the triple digits in recent years.

That's because demand is surging for Nvidia's products and services, essential tools in the development and application of AI. In recent times, though, some investors have wondered whether this market leader's momentum will continue. After all, the company faces competition, and any potential economic hiccup could put the brakes on AI spending.

But, for reasons I'll explain, I'm optimistic about Nvidia today and over the long term. In fact, my prediction is buying Nvidia stock right now could set you up for life.

Nvidia's early days

First, let's consider Nvidia's story so far. The company has been around more than 30 years, but in its early days, its future AI dominance wasn't even on the radar screen. Instead, Nvidia mainly served the video games market with its graphics processing units (GPUs) and steadily grew revenue -- but levels were very far from today's multibillion-dollar quarters.

NVDA Revenue (Annual) data by YCharts

Fast forward several years to times when the potential of AI started to be heard more clearly: Nvidia decided to tailor its GPUs to match the needs of this high-potential technology, and as they say, the rest is history. The company got in early on the AI chip market, securing the first-to-market advantage, and from there built a solid reputation as an AI chip expert. Customers were impressed by the power of Nvidia's GPUs to train their large language models (LLMs), and that prompted them to keep coming back, not only for training but now for inferencing -- inferencing is seen as the next big growth area for GPUs.

But Nvidia didn't stop there and instead has built out a great selection of products and services that support customers' AI projects. So, these customers can rely on Nvidia for all of their needs rather than turning to others for certain tools or services. All of this has reinforced Nvidia's AI leadership.

A focus on annual updates

Importantly, Nvidia now is taking a key step to reinforce this leadership: The company has committed to updating its chips on annual basis, a move that will make it difficult for competitors to catch up. And this constant innovation, offering more computing power and efficiency to customers, should keep these customers coming back -- the biggest tech companies are focused on winning in the AI space, meaning its crucial for them to access the best tools available. All of this supports the idea of ongoing demand for Nvidia's newest releases -- and this should translate into revenue growth over time.

In fact, Nvidia's forecast that AI infrastructure spending will reach as much as $4 trillion by the end of the decade suggests Nvidia may be looking at a trillion-dollar revenue opportunity. If we use the past as an example, with Nvidia winning about 25% of data center spending, the company could generate $1 trillion in revenue thanks to this AI buildout. And Nvidia's ability to generate strong profit on sales -- with gross margin generally surpassing 70% -- should continue as the company's annual product releases become routine.

Nvidia's valuation

Meanwhile, right now, Nvidia stock trades for only 38x forward earnings estimates, leaving it plenty of room to run. And that equals a buying opportunity for you.

Now let's talk about how this stock could set you up for life. It's important to say that you shouldn't rely on any one stock to perform for you -- even a top-quality company. Putting all of your eggs in one basket in investing is too risky, so you always should invest in several stocks across industries and hold on for at least five years.

In that context of a well-diversified portfolio, though, my prediction is Nvidia will help set you up for life. The stock, in the past, has roared higher as Nvidia's revenue climbed. And today, considering revenue may advance from the billions of dollars -- it ended last year at $130 billion -- to about $1 trillion a few years from now suggests the stock price may once again deliver enormous long-term gains. This makes Nvidia a great stock to buy right now and hold as it could send the value of your portfolio soaring.