Nvidia (NVDA -3.00%) was one of the best-performing stocks of 2024. It even dwarfed the returns of the Nasdaq Composite index in a year the index itself returned an amazing 28.6%. Its stock price soared as the market became enthused by consistent triple-digit revenue gains that led to triple-digit net income gains. That led to a 171% increase in Nvidia's stock price in 2024. It also pushed the stock's price-to-sales ratio to 30.

Those who might think that means the stock is now too expensive should look at the opportunity still ahead. Enough opportunity can trump a high P/S. One chart might help explain.

The market opportunity tells the story

Big tech companies continue to ramp up spending to build artificial intelligence (AI) infrastructure. Microsoft and Amazon each recently announced commitments to invest $80 billion and $11 billion, respectively, in the coming months. The investments are for data centers to train AI models, and distribute AI and cloud-based applications. That's because the market for generative AI is expected to grow tenfold over the remainder of the decade.

Image source: Statista.

Generative AI has a wide array of applications. It is already being used to generate content and enhance creativity. Businesses use it to enhance customer experiences by adapting content and services to individual preferences. It can enhance existing data, improve cost efficiency, foster innovation, and aid in simulations and planning. Investors themselves are using generative AI for multiple reasons.

Nvidia will be a major beneficiary of the investments to build out the needed infrastructure. Its Blackwell architecture is already in high demand, and the company will have its new Rubin platform available next year to succeed Blackwell.

CEO Jensen Huang also introduced a new desktop supercomputer at the recent CES conference in Las Vegas. The $3,000 unit can be used by researchers, data scientists, and even students. It shows that Nvidia is broadening the market for its advanced chips beyond just hyperscaler data centers.

With a quickly growing market for generative AI and innovative products, Nvidia has enough business opportunity ahead to justify the elevated valuation.