Nvidia Stock: Should South African Investors Buy, Sell, or Hold?

Over the past five years, Nvidia has captured significant attention, particularly due to its leading role in artificial intelligence (AI) infrastructure. As the company continues to dominate the AI hardware sector, especially in GPUs (Graphics Processing Units), many investors are curious whether Nvidia’s stock is still a worthwhile buy or if it’s time to sell or hold.

The Buy Case: Early AI Boom

Nvidia is in a prime position to continue benefiting from the growing demand for AI infrastructure. The surge in AI projects has led to an enormous need for computing power, particularly with large language models (LLMs). As AI models like Meta’s Llama and Elon Musk’s xAI become more complex, the need for GPUs rises exponentially. For instance, xAI’s Grok-3 model requires around 100,000 GPUs compared to 20,000 for its predecessor, Grok-2. Similarly, Llama 4 will require 10 times the GPU power that Llama 3 used.

This increased demand is reflected in the rising capital expenditure (capex) by tech giants. CEOs from Alphabet and Meta have emphasized the risk of underinvesting in AI, while Oracle’s Larry Ellison has predicted continued spending in AI for the next decade. Nvidia is uniquely positioned to take advantage of this demand with its cutting-edge GPUs and its CUDA software, which has become essential for GPU programming.

Moreover, Nvidia has accelerated its development cycle, releasing new chips annually, giving it a competitive edge. Its stock, despite its growth, remains relatively affordable with a forward price-to-earnings ratio of 29 and a price/earnings-to-growth (PEG) ratio of less than 1, which suggests potential undervaluation.

The Sell Case: AI Demand May Wane

There’s a possibility that Nvidia’s current demand may cool off. Although AI infrastructure requires a lot of GPUs for training models, the demand for AI inference—where trained models are used—may not require as many. If companies slow down spending on infrastructure and focus more on using existing models, this could impact Nvidia’s sales.

Moreover, for the AI boom to continue benefiting Nvidia, its customers must also generate returns on their investments. While companies like Microsoft and Alphabet have seen growth in their cloud computing segments, the impact on software companies has been mixed. Adobe and Microsoft, while at the forefront of AI, have seen only modest sales increases. If AI adoption across industries slows down or doesn’t yield expected returns, Nvidia’s sales might not continue at the current pace.

The Hold Case: Steady Growth Ahead

If you’re an existing Nvidia shareholder, holding onto the stock might be a wise choice. Nvidia’s stock has shown significant growth, and given its position in the AI sector, it’s likely to continue growing, though at a steadier pace. Managing the size of your Nvidia holdings to ensure it doesn’t become too dominant in your portfolio is important, but the stock itself still holds potential for further gains.

Final Verdict: Buy for Long-Term Potential

Despite the risks, Nvidia’s strong market position and its role in the AI infrastructure buildout suggest that it’s still a good investment. With the AI boom still in its early stages and the company maintaining a technological lead in the GPU space, Nvidia is well-positioned to benefit from future demand.

The stock’s valuation remains reasonable given its growth prospects, making it an attractive buy for investors looking to capitalize on the AI revolution.