Is Nvidia the Top Artificial Intelligence Stock to Buy in July?

However, the reality is that there has never been a larger investment theme

That will help one company more than any other: Nvidia (NVDA -3

Nvidia has been the top AI stock pick for several years now, and it remains a strong choice for the future

But is it the best AI stock to buy in July

Image source: Getty Images

Data center growth isn't over Nvidia manufactures graphics cessing units (GPUs) -- chips that were originally designed to allow computers to generate high-quality graphics in games

What allows them to do that so well is that these chips are parallel cessors -- specifically suited to handling the types of computations that can easily be broken down into a large number of small tasks that can be handled simultaneously

Among the types of high-performance workloads that fit that particular bill are training and running AI models

Nvidia has competitors in the data center GPU market, but none come close to the nology and supporting ducts that it offers

Data center spending is also jected to skyrocket over the next few years

If Nvidia can maintain its of those expenditures, its revenue would more than double over that period

AI computing capacity is far from being fully built out to the degree that the sector expects to need, which keeps the story behind Nvidia's stock intact

But is the stock priced at a reasonable level for new investors to capitalize on future growth

Nvidia's stock trades in line with its peers There's a common notion that Nvidia's stock has become quite expensive, but that's something investors need to get out of their heads

While it may have been true early on in the AI arms race, that's no longer the case

It trades today at 36 times forward earnings, which is right around where some of its big peers are trading -- and Nvidia is growing at a faster rate than they are

NVDA PE Ratio (Forward) data by YCharts

Microsoft and Amazon trade for 37 and 34 times forward earnings, respectively

Yet during their most recently reported quarters, Microsoft grew its revenue at a 13% pace, while Amazon grew at a 9% pace

I'm not trying to argue that Nvidia is cheap, but its valuation is hovering around the same levels as its big peers

If its data center GPU sales grow at the rates that it expects, then the price today will be inconsequential years down the road

As a result, I'm confident in labeling Nvidia as the best AI stock to buy in July

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors

Keithen Drury has positions in Amazon and Nvidia

The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia

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