Despite the considerable buzz, the artificial intelligence (AI) revolution is still in its early stages. Over the coming years, anticipate significant advancements throughout the sector, leading to a constant stream of new AI-driven products and services for consumers and businesses alike. While it remains uncertain which specific products or services will ultimately dominate, the primary suppliers fueling this AI revolution are becoming clearer. In that regard, there’s one company that stands out as a particularly promising long-term investment.
That company, and the one that possesses a major sustainable advantage, is Nvidia (NVDA). It’s a company that will be familiar to most investors, as it’s one of the world’s largest businesses, with a market capitalization of trillions of dollars. However, for those seeking to capitalize on the AI revolution, expected to accelerate substantially over the next decade, Nvidia still has plenty of room for growth. This potential stems from several factors, most prominently the expansion of end-markets.
According to a recent research report from Deloitte, “Chip sales are set to soar in 2025, led by generative AI and data center build-outs.” However, this surge won’t affect all types of chips equally. The primary growth will occur in the emerging category of AI graphics processing units (GPUs). Deloitte estimates that these chips accounted for approximately 20% of total chip sales in 2024, with revenues totaling around $125 billion. In 2025, AI-specific chips are projected to generate global sales of roughly $150 billion, representing a healthy year-over-year increase; however, the most significant growth is anticipated in the latter half of this decade.
Lisa Su, the CEO of chipmaker Advanced Micro Devices, believes the total addressable market for AI chips could reach $500 billion by 2028 — exceeding the revenue of nearly the entire chip industry in the preceding year. Historically, chip manufacturers have experienced cycles where they initially achieve dominance, only to eventually lose their position due to competition. However, this cycle might unfold differently.
While Nvidia is likely to cede some market share for AI GPUs — which is currently estimated at between 80% and 85% — the overall expansion in AI infrastructure demand could create numerous winners. Even as Nvidia’s market share potentially diminishes, its sales could continue to rise significantly over the coming years due to robust spending on its products, an outcome that could even allow Nvidia to retain its dominant position in the AI GPU market, thanks to its distinct advantage: its developer ecosystem, a sustainable advantage that makes the stock a buy right now for patient shareholders.
Nvidia’s current dominance in AI GPUs is attributable to several factors. First, the company made substantial investments in the AI space well before most of its competitors. Second, it leveraged the results of those early investments to establish an early lead and subsequently reinvested the profits into further innovation, fostering innovation momentum as the AI space took off. Finally, and perhaps most importantly, nearly two decades ago, the company prioritized attracting and retaining developers with a novel programming model and language for its GPUs, along with a free software development kit known as CUDA. These initiatives successfully drew developers into its architectural ecosystem, enabling them to utilize its products across the entire technology stack.
This strategy provided developers with performance advantages and created a high level of “stickiness” for Nvidia’s products, an advantage that eventually extended to its AI products. As a report in Communications of the ACM noted, “CUDA software only runs on Nvidia GPUs… Rising application usage, such as for training LLMs [large language models] and running inference engines built with CUDA software, requires more Nvidia hardware… In this case, Nvidia dominates both the hardware and software sides of the platform.”
By maintaining control over both the software and hardware aspects through long-term developer outreach and collaboration, Nvidia remains an excellent long-term investment option for those betting on the AI revolution.
