Growth Investing: A Look at Nvidia and Meta Platforms

Growth Investing: Nvidia and Meta Platforms

When it comes to growth investing, the best opportunities lie within companies that are not only succeeding today but are also strategically positioned to dominate their respective industries for years to come. Let's examine two companies that have risen to the top of their fields and continue to possess significant growth potential.

1. Nvidia

Nvidia (NVDA 0.35%) didn't accidentally become a leader in artificial intelligence (AI) infrastructure. Long before AI became mainstream, the company strategically laid the groundwork by creating its CUDA software program, allowing its chips to be programmed. This was then offered for free to universities and research labs conducting early AI work, establishing CUDA as the foundational coding platform for graphics processing units (GPUs) in AI development. But Nvidia didn't stop there. On the networking front, they engineered the NVLink interconnect system, enabling their GPUs to function as a unified entity. This proprietary system is exclusive to Nvidia's GPUs. Further bolstering its networking capabilities, Nvidia acquired Mellanox. This acquisition equipped them with the technology required to deliver the turnkey solutions they offer clients today. These solutions streamline AI infrastructure deployment, reducing complexity and time-to-market. Looking to safeguard its commanding lead in the AI chip market, Nvidia recently invested in and partnered with Intel to tap into their central processing unit (CPU) technology. Moreover, they announced a substantial investment of up to $100 billion in OpenAI. Given OpenAI's exploration of developing custom AI chips in collaboration with Broadcom, Nvidia's investment is likely aimed at ensuring its chips remain central to OpenAI's expansive AI infrastructure plans. This move highlights Nvidia's proactive approach to maintaining its competitive edge and securing its position in the rapidly evolving AI landscape. CEO Jensen Huang estimates that AI infrastructure spending could reach as high as $4 trillion in the coming years. With data center spending showing no signs of deceleration, Nvidia appears well-poised to remain a prominent beneficiary of the AI revolution.

2. Meta Platforms

Meta Platforms (META -1.46%) has emerged as a major player in the AI arena, successfully leveraging the technology to enhance user engagement on Instagram and Facebook. Social media is now heavily reliant on entertainment alongside social connection, and Meta has capitalized on AI to refine its recommendation engines. This enables them to provide users with more engaging content, thereby extending their time spent on the platforms. Concurrently, Meta is empowering advertisers with sophisticated tools to create and target advertisements, leading to improved campaign performance and higher advertising costs. The convergence of increased ad inventory and premium ad pricing is driving substantial revenue growth, with ad sales experiencing a 22% year-over-year increase in the most recent quarter. However, this represents only a portion of Meta's overall growth narrative. The company has recently started to integrate advertising into WhatsApp and Threads. WhatsApp boasts a massive user base of 3 billion, and although the majority are international users with generally lower monetization rates, this venture still presents a significant opportunity. Furthermore, Threads is still under development, indicating substantial potential for future user growth. CEO Mark Zuckerberg is investing heavily in what he calls "personal superintelligence," directing considerable resources into AI talent acquisition and infrastructure development. Coupled with the company's foray into consumer smart glasses and its ongoing metaverse initiatives, Meta is pursuing a diversified strategy in hopes of achieving groundbreaking success. For long-term investors, the synergy of consistent advertising growth and the optionality arising from its significant investments makes Meta a compelling stock to consider for the next decade. These investments represent calculated risks with the potential to yield substantial returns, further solidifying Meta's position as a leader in the technology sector.