Nvidia (NVDA 0.35%) The stock has soared more than 435% since early 2023 as companies flocked to the tech giant for its top-performing suite of artificial intelligence (AI) chips. Its sales and bottom line exploded, rising at triple-digit rates each quarter. Revenue for the fourth quarter of 2024 reached a record high of $22.1 billion, and net income increased to $12.3 billion.
But amid all this good news, there is one thing investors are concerned about. It’s competition. Nvidia faces challenges from fellow chip designers, including: Advanced Micro Devices And among those partners Amazon Web services (AWS). But before you worry too much about rivals taking over this huge market, take note of one particular number, one that could ensure the dominance of Nvidia’s AI chips going forward. That is important.
I’m talking about research and development (R&D) spending. As you can see below, Nvidia’s R&D expenses have increased in recent years, reaching $8.7 billion in fiscal year 2024. This is an increase of nearly 500% in just seven years and shows that Nvidia has focused on driving innovation during this period.
Nvidia’s 80% market share
Nvidia currently controls more than 80% of the AI chip market, so the company has a clear advantage. But at the same time, rivals are doing everything they can to chip away at NVIDIA’s lead.
AMD released a new high-performance chip late last year, albeit slower than Nvidia’s top offering, that may appeal to some cost-conscious customers. AWS also aims to attract customers on a budget by offering chips for language model training and inference. These are just two examples.
Therefore, it is imperative that Nvidia continues to innovate by devoting resources to research and development to ensure its chips continue to lead the market. This gives the company pricing power and should ensure its AI chips remain dominant over the long term.
And these efforts, along with a strong earnings track record, make Nvidia a great growth stock to buy today.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Adria Cimino has a position at his Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool has a disclosure policy.
