Artificial intelligence (AI) stocks have been booming recently and Nvidia (NASDAQ: NVDA) is no exception. In the last five years, the chipmaker has skyrocketed a whopping 1,914.4%. That’s amazing.
But where will it go next? I’m a shareholder in the AI darling. To date, my investment is up 110.1%. Given the success I’ve experienced so far, I’m open to gaining more exposure to the sector.
But is buying more Nvidia shares the best way to do this?
A case to be made
The AI industry’s fast evolving and Nvidia’s the frontrunner. Therefore, there’s a clear argument to be made that it makes a lot of sense to own the stock.
That’s especially true after it announced plans for a new processor design called Blackwell at its GTC conference on 18 March. Blackwell-based products will be available towards the tail end of 2024. The chips are expected to be significantly faster than previous models. Chief Executive Jensen Huang noted that Blackwell chips are “the engine to power this new industrial revolution”.
That’s exciting news. It builds on the impressive growth Nvidia has already seen with its current chips. That includes the H100. Surging demand for it helped its Data Centre revenues jump 409% year on year.
Too many risks?
But with all this hype comes one major risk. Nvidia could be in a bubble. There’s plenty of speculation that the stock has risen too quickly.
It’s now one of the largest companies in the world by market-cap. While its growth has been exceptional, shareholders now have high expectations. Any signs of a slowdown could see its price come crashing down.
Time to look elsewhere?
With that in mind, is it time for me to look elsewhere for my next AI buy? There are a few businesses on my radar. Maybe I’ve missed the boat on topping up with Nvidia.
One I like the look of is Scottish Mortgage Investment Trust (LSE: SMT). Nvidia makes up one of the 99 companies it owns. The trust has been gaining momentum lately but it’s still some way off its all-time high.
That’s because in the current macroeconomic environment, growth stocks, which Scottish Mortgage focuses on owning, don’t tend to fair well. It’s down 44.9% from its November 2021 price of over £15. It may continue to suffer as long as interest rates remain high.
But through owning Scottish Mortgage, I get large exposure to AI through companies such as Amazon, ASML, and Shopify, to name a few. What’s more, it’s trading at a 9.5% discount to its net asset value. Essentially, that means I can buy the businesses it holds for cheaper than their market rate. I like the sound of that.
My move
In short, I think buying Nvidia is a smart way to gain exposure. However, seeing as I already own shares, I’m not keen on adding to my position today.
Having a diversified portfolio is imperative. Therefore, I’ll be exploring other options to buy before I consider Nvidia. I like the look of Scottish Mortgage. Not only does it offer me diversification, but I also think its shares look like a steal.
If I had the cash, I’d open a position.
The post Is buying Nvidia stock the best way to get exposure to the artificial intelligence revolution? appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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More reading
Up 1,940% since 2019, is NVIDIA stock only just beginning?
£20,000 in savings? Here’s how I’d aim to turn that into a £46,738 annual second income
Can this new £1bn buyback send the Scottish Mortgage share price climbing?
If I’d invested £5,000 in Nvidia shares when ChatGPT came out, here’s how much I’d have now
5 growth stocks Fools think will benefit from interest rate cuts in 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Keough has positions in Nvidia. The Motley Fool UK has recommended ASML, Amazon, Nvidia, and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
