Let's face it: Investors put money to work in the stock market with a single core goal -- to achieve strong returns and grow those funds. And over the long term, a diversified portfolio can certainly do just that. Over the past two decades, the S&P 500 index has registered a 557% total return. But that is, of course, the average result from a large group of companies. Some have produced drastically better gains.

For example, a $10,000 investment made exactly 20 years ago in one business that has since become an industry leader would be worth more than $6 million (as of April 22). That monster gain would be life-changing wealth for any patient investor who was bold (and lucky) enough to bet on that then-unproven company and hold on through good times and bad along the way.

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That amazing business was none other than Netflix (NASDAQ: NFLX). But should you buy it today?

Press play

When it comes to disruption and innovation, few companies fall into the same elite category as this one. Netflix's success over the years has been truly exceptional.

When Netflix was young, traditional cable TV was the primary medium by which households watched their favorite shows and movies. However, the growth of high-speed internet access provided the DVD-rental-by-mail company with the technological infrastructure to bring streaming video entertainment to the masses. Netflix launched its streaming service in the U.S. in 2007, and today, it operates in 190 countries.

Netflix easily won over customers by providing a superior experience. People could choose to watch whatever they wanted from a large and growing content catalog whenever they wanted to watch it, all for a monthly fee that was much cheaper than a basic cable subscription. This helped drive rapid adoption. Between the end of 2014 and the end of 2024, the company increased its paid subscriber base by 459% and its revenue by 609%.

A dominant force

It would be hard to overstate just how much of a media powerhouse Netflix has become. More than 300 million households pay for its subscriptions, and management says it reaches a whopping 700 million people. It's on pace to rake in $44 billion in revenue in 2025.

From a financial perspective, Netflix has reached a level of profitability that its early critics probably never thought was possible. Credit goes to the company's massive scale. Keeping the new content pipeline full is expensive, but those costs are (relatively speaking) fixed -- it won't cost the company incrementally more to show the new season of Stranger Things to a larger audience, for example. Netflix plans to lay out $18 billion this year on new shows and films, but it has huge user and revenue bases to amortize that spending against.

The result is a lucrative business model. Netflix executives forecast an operating margin of 29% for 2025. That would be up drastically from 18% in 2020, showcasing the company's ability to scale up profitably. The business reported $6.9 billion in free cash flow last year -- most of which it used to repurchase $6.2 billion worth of outstanding shares.

Press pause

The stock market is in correction territory right now, but this hasn't fazed Netflix investors. The stock is up 17% this year as of April 22, bucking the S&P 500's 10% decline.

But though Netflix stock has been a tremendous winner in the past, I don't believe it's automatically a buy today. The valuation is what worries me. As of this writing, shares trade at a price-to-earnings ratio of 49.2. That's not a small premium to pay.

I'm totally confident that Netflix will not generate another 60,000% return over the next 20 years. Given its current market cap of around $467 billion, it's just not financially feasible for it to grow to a size 100 times bigger than Apple. My perhaps more controversial view is that it might not even outperform the broader market during that time. The business is poised to continue its solid growth, but its current valuation already has some of the market's high expectations baked in.

Investors who believe Netflix is a quality company worth owning should be patient and wait until there's a better opportunity to add shares at a less lofty valuation. But if you prefer not to wait, consider using a dollar-cost averaging strategy to build your position over time.

Should you invest $1,000 in Netflix right now?

Before you buy stock in Netflix, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.

Costco (NASDAQ: COST) and Home Depot (NYSE: HD) are two of the biggest retailers in the world. One focuses on general merchandise, while the other caters to DIY and professional customers with home improvement products. The combined market cap of these two companies is a staggering $770 billion as of April 21.

Costco and Home Depot have been wildly successful investments in the past three decades. But between these dominant businesses, which one is the top retail stock to add to your portfolio right now?

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Not worried about a recession

Investors are becoming more worried that an economic downturn is on the horizon. This probably isn't too much of a concern for Costco and its management team. The business continues to thrive regardless of external forces.

During the fiscal 2025 second quarter (ended Feb. 16), same-store sales (SSS) were up 6.8% year over year. This was driven mostly by a meaningful gain in foot traffic, an encouraging sign. Home furnishings, gold and jewelry, and appliances, among other items, registered strong growth.

In a potential recessionary period, Costco should be able to hold up better than its rivals. Its focus on low prices on quality goods makes it a favorite choice among consumers, especially when it comes to everyday essentials.

A successful membership-based model keeps these shoppers loyal, while also providing the business with a high-margin and recurring revenue stream. Costco's membership base now sits at 78.4 million households, supporting $1.2 billion in membership fee income.

Costco's ability to generate consistent profits is a feature of the durable demand it experiences. In addition to a regular dividend, the leadership team shares these earnings with investors in the form of special one-time payouts. The last one was for $15 per share in January 2024. A favorable capital allocation practice like this can boost returns for investors.

Thinking about the bigger picture

Home Depot raked in $159.5 billion in revenue in fiscal 2024 (ended Feb. 2), putting it significantly ahead of Lowe's in the home improvement industry. Its massive scale allows for sizable investments in supply chain and omnichannel capabilities, ensuring adequate inventory for customers. Home Depot's brand name undoubtedly carries weight, too.

Despite its competitive strengths, the business has been struggling recently. On the fourth-quarter 2024 earnings call, CEO Ted Decker said he and his team are focused on strategic priorities "despite uncertain macroeconomic conditions in a higher interest rate environment that impacted home improvement demand."

It's not surprising that the backdrop doesn't give people the confidence they need to spend a lot on a costly renovation project. Home Depot's SSS are expected to rise by only 1% this fiscal year, after falling 1.8% in fiscal 2024.

However, the overall industry should favor Home Depot in the long run. The median age of a home in the U.S. has gone up over the years. And the leadership team points to trillions of dollars in untapped home equity that can go toward upgrades.

Investors will be pleased with Home Depot's capital returns. The company paid $8.9 billion in dividends last fiscal year, and in the past five years, it has reduced the outstanding share count by almost 10%.

The final word on Costco vs. Home Depot

In my mind, Costco is the superior business compared to Home Depot, due to the simple fact that its customer demand appears to be much less sensitive to macro forces, while the latter's dependency on a favorable housing market is evident. To be clear, though, both are likely set to be affected by tariffs as things stand today.

However, that doesn't mean Costco is the better retail stock to buy. Home Depot is more deserving of a spot in your portfolio. It comes down to valuation. The home improvement chain's shares trade at a price-to-earnings ratio of 23.2, well below Costco's 55.9 multiple.

Some investors might not be fazed, preferring to own the best businesses regardless of valuations. This will push you toward choosing Costco over Home Depot. In this instance, I think the smart move is to adopt a dollar-cost averaging strategy, allocating a small sum on a recurring basis to buy shares at various price points.

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Before you buy stock in Costco Wholesale, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $566,035!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $629,519!*

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*Stock Advisor returns as of April 21, 2025

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.

Amazon (NASDAQ: AMZN) is a dominant technology-driven enterprise that has customers all across the globe. It got here thanks to fantastic growth. Between 2014 and 2024, the company's revenue increased at a compound annual rate of 22%. This rapid ascent has made Amazon one of the world's most valuable businesses.

Viewing things with a fresh perspective today, with an eye toward the future, you might be wondering if the company can continue on its impressive trajectory. There are reasons to remain bullish. Here's why Amazon is the smartest growth stock to buy in April with $2,000.

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Massive end markets

If a company is lucky, it'll benefit from one secular trend. Amazon stands out because it has multiple tailwinds working in its favor. Additionally, the business operates in massive global end markets.

Take the e-commerce sector. Almost 40% of all spending online in the U.S. goes through amazon.com. Given that Grand View Research estimates the worldwide retail e-commerce market to grow at a nearly 12% annualized rate from its already large size of $6 trillion, Amazon is set to capture a lot of this opportunity.

Cloud computing is another important area. Amazon Web Services (AWS) posted 19% sales growth in Q4, with a stellar 37% operating margin. It's the industry leader with the most market share. And according to Grand View Research, the global market is worth about $800 billion today and will be worth much more in the future.

There's also digital advertising, a booming money-maker. In 2024, Amazon raked in more than $17 billion in revenue (up 18% year over year), which is surely generating a high margin. Only Alphabet and Meta Platforms have a bigger presence in digital advertising.

Combined, these industries are valued in the trillions of dollars. This gives Amazon plenty of opportunity to drive growth.

What about artificial intelligence?

Another secular trend that has come up in recent years is artificial intelligence (AI). Amazon has already been using AI capabilities throughout its business. For example, the online marketplace uses AI for personalized shopping recommendations. Prime Video uses AI to suggest shows and movies to watch. Alexa also leans on AI to process commands and respond accordingly.

Looking ahead, AI is and will continue to play a more pronounced role for the company, particularly within AWS. AWS offers a broad suite of AI tools and services for clients, like Bedrock for building generative AI apps, Translate for language translation, and Kendra for search functionality.

Amazon is planning to spend $100 billion on capital expenditures in 2025. "The vast majority of that capex spend is on AI for AWS," CEO Andy Jassy said on the Q4 2024 earnings call. He went on to declare that AI "is one of these once-in-a-lifetime type of business opportunities."

Durable growth

Investors gravitate to the fastest-growing companies. Maybe it's because they are the easiest to spot. And for sure it's because they believe they can generate huge returns over time by owning them.

Instead of focusing on how rapid the gains are, perhaps it's a better idea to look for durable growth. These are businesses that should see revenue increase at a much faster clip than GDP over an extended period of time, not just for a few years before fizzling out. While Amazon was an unbelievably fast grower in its early years, it has now transformed into registering healthy expansion.

Having multiple powerful secular trends working in its favor is helpful. What's more, Amazon's wide economic moat, supported by its brand, switching costs, network effects, and cost advantage, substantially decreases the chances the business ever gets disrupted.

These factors make it the smartest growth stock to buy with $2,000, in my opinion. As of April 21, the shares trade at a price-to-sales ratio of 2.9. This is very reasonable for such a dominant enterprise.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $561,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $606,106!*

Now, it’s worth noting Stock Advisor’s total average return is 811% — a market-crushing outperformance compared to 153% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of April 21, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.

The S&P 500 index rose 24% in 2023 and climbed another 23% in 2024, putting together a stellar 24-month return. Investors were pleased with the outcome.

However, this year is so far shaping up to be a disappointment. The S&P 500 is around 15% below its peak, a record that was established in February. Investors are worried that President Donald Trump's trade policies will tip the economy into a recession, so they're taking some risk off the table.

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If you're worried that the market is going to drop even further, then there's one stock to keep an eye on. It's actually up 17% this year, showcasing investor confidence in the business.

Steady as they come

In the past couple of years, the investment community has been enamored with businesses at the forefront of artificial intelligence (AI). The belief is that this technology will disrupt many industries, and so they've generally shifted their portfolios to gain exposure.

O'Reilly Automotive (NASDAQ: ORLY) could not be further from the AI boom. It's a boring aftermarket auto parts retailer that is a steady performer, regardless of macro conditions. And I think the market sees this durability, which is why the share price has jumped double-digits so far in 2025.

Through its 6,378 stores, of which 6,265 are in the U.S., and via its omnichannel presence, O'Reilly sells things like batteries, brakes, motor oil, wiper blades, and filters to both do-it-yourself customers and professional mechanics. Basically, people buy merchandise from O'Reilly to fix up their cars.

In a positive economic backdrop, consumers tend to drive more, increasing the wear and tear on their vehicles. This supports demand for the company. And in difficult economic times, people will hold off buying a new car. Instead, money will go toward maintaining the cars they already own. Again, O'Reilly benefits.

While tariffs are on everyone's mind these days, they might actually end up benefiting O'Reilly as people are discouraged from shopping for new cars because of higher prices. This all-weather appeal might be too hard for investors to ignore.

Strong financials

One of the most important metrics for a retailer is same-store sales (SSS), as it indicates changes in revenue from locations that have typically been open at least a year. O'Reilly has an unbelievable track record, increasing SSS in 32 straight years. The management team expects this figure to rise 2% to 4% this year, which would keep the streak alive.

The business has found a way to maintain its growth trajectory no matter what is happening externally. Unsurprisingly, this has led to strong profit gains, with earnings per share increasing at a compound annual rate of 18.7% in the past decade. With new store openings a key part of the strategy, the bottom line is set to keep growing.

Not on sale

Since mid-April 2015, shares of O'Reilly have catapulted 546% higher. This fantastic gain meaningfully outpaces the broader S&P 500. Consequently, the valuation isn't cheap. Investors who want to own this stock must be comfortable paying a price-to-earnings ratio of 34.2. That's over 40% more expensive than the trailing five- and 10-year average multiples.

The market is clearly very bullish on O'Reilly. That perspective is easy to understand. However, the valuation is too steep, even though this is a high-quality business.

O'Reilly has been a huge winner in the past. But I think it's best for investors to add the stock to the watch list for now. Wait for any sizable pullbacks before considering putting money to work.

Should you invest $1,000 in O'Reilly Automotive right now?

Before you buy stock in O'Reilly Automotive, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and O'Reilly Automotive wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $532,771!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $593,970!*

Now, it’s worth noting Stock Advisor’s total average return is 781% — a market-crushing outperformance compared to 149% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Shares of Apple (NASDAQ: AAPL) are currently 26% below their peak from December last year (as of April 10), a drop that has been spurred by ongoing tariff announcements. As of this writing, there is a huge 145% tariff that's implemented on goods leaving China for the U.S. If this remains in place, it could harm Apple, because 80% of its production is still based in China, according to estimates from Evercore.

For consumers, the result could be much higher prices. If the increased costs are eaten by Apple, on the other hand, its profitability will definitely take a hit. There remains a lot of uncertainty about how things will play out.

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Despite the potential effects, which are commanding all the attention these days, Apple has proven to be successful in another area that highlights growing diversification in the business model. Here's what investors need to know.

Apple's push into financial services

In fiscal 2024 (ended Sept. 28, 2024), Apple generated $391 billion in revenue, of which 75% came from the sale of products. This includes its popular iPhone, Mac, and iPad lineups.

But the company's services division is an up-and-coming money-maker, growing revenue 13% in the latest fiscal year, much faster than the overall business. It represents the other 25% of Apple's total sales.

Within services, Apple is making a bigger push into the financial services realm, where it appears to have developed a strong foothold.

In 2014, the company launched Apple Pay, its digital wallet solution that lets users connect credit and debit cards to use for transactions in-store and online. More than 90% of retailers in the U.S. accept Apple Pay, which has more than 600 million global users and handles trillions of dollars in payment volume. This is undoubtedly becoming a widely used checkout option.

Apple Card was launched in 2019. This is a credit card that gives consumers up to 3% cash back with no fees whatsoever. Apple partnered with Goldman Sachs to handle the program. The credit card portfolio has 12 million customers (data from early 2024) and $20 billion in balances.

Valuable for partners

It was reported that Visa offered the tech titan a cool $100 million to end its relationship with Mastercard, the current card network for Apple Card. American Express is also in the mix. What's more, issuers like JPMorgan Chase, Capital One, Synchrony Financial, and others are reaching out to Goldman Sachs, offering to take over the $20 billion in balances and to handle the program.

It makes sense why these heavyweights in the financial services industry would be trying so hard to be Apple's partner. Apple generates enormous amounts of revenue, and its customers are generally known to be more affluent than average. Consequently, there is a lot of buying power here, which can lead to revenue opportunities for banks and payment networks.

Apple might be facing some headaches due to tariffs and how they can affect its device sales. But its payment and credit card offerings continue to shine brightly. Partners are jockeying for position.

Should you buy Apple stock on the dip?

This gets to the discussion of whether or not Apple shares are a smart buy right now, especially since they are 26% below their record high. The price-to-earnings ratio is better than it was in December -- it's now at a 30.2 multiple.

However, I'm not convinced the tech stock can produce a return over the next five years that can outperform the broader market. Not only is the valuation still elevated, Apple's growth prospects aren't that robust. Plus, there is the unfortunate overhang of the tariff situation.

This is a fantastic business. But investors should pass on buying shares.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

American Express is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Synchrony Financial is an advertising partner of Motley Fool Money. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Goldman Sachs Group, JPMorgan Chase, Mastercard, and Visa. The Motley Fool has a disclosure policy.

The stock market may be the best place to build long-term wealth, but there's no guarantee it will be a smooth ride as investors have likely noticed in the past week of steep price swings.

The announcement of fresh tariff policies on April 2 sent the S&P 500 (SNPINDEX: ^GSPC) plunging. The downward trend continued into the following week until April 9, when President Trump issued a 90-day pause on nearly all of the newly announced tariffs, except those on Chinese goods. That reversal pushed the benchmark index up a jaw-dropping 9.5% in a single session.

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Despite that temporary sigh of relief, many investors are still worried. In times of uncertainty, history says to keep these three things in mind to stay on track with your portfolio.

Expect periods of turmoil

Everyone wants to see the value of their portfolio always go up and to the right, but this just isn't how the market works. If you view the stock market as a reflection of every investor's mood at any given point in time, it makes sense there will be periods of extreme optimism, as well as times when it feels like the world is ending.

In other words, corrections and bear markets aren't anything new. In fact, the S&P 500 has experienced a correction 56 times since 1950, and a bear market occurs about once every three-and-a-half years. Despite the down periods, which can be unnerving, the broad index has produced a historical average annualized return of 10%.

It's also worth mentioning that the best buying opportunities can often present themselves when the prevailing market sentiment is most bearish. As legendary investor Warren Buffett is known for saying, "Be greedy when others are fearful."

Uncertainty is a constant companion

The current economic environment is full of uncertainty. Investment banks are updating their models to reflect increased odds that the U.S. will enter a recession this year. Consumer confidence has plummeted, and it's now at the lowest level in over two years. Companies are lowering their growth forecasts.

To be clear, it's natural for an investor to worry when facing these developments. The situation might even discourage you from putting money in the market, or even worse, it might lead you to sell your stocks.

But if you look at the past, it also becomes clear how investors must always grapple with an uncertain environment. Just in the past five years, they've had to navigate the COVID-19 pandemic, supply chain bottlenecks, inflationary pressures, and rapidly rising interest rates. Yet, those issues didn't prevent the S&P 500 from posting a total return of 96% since April 2020.

So, while the market hates uncertainty, the truth is the future is always somewhat unpredictable. Good companies can adapt to changing industry conditions.

Time in the market matters most

When there's a lot of volatility in the stock market, the best course of action is to strategically sell high and buy low, right? After all, it makes sense that investors would want to avoid the sell-off and profit from the recovery.

This is easier said than done, though, and it is likely to end up causing more harm to your portfolio than simply holding fast. What matters most is spending time in the market, not perfectly timing your investments. This means being fully invested, assuming you have taken important measures like establishing an adequate emergency fund and paying off high-interest debt.

A powerful tool of consistency is called dollar-cost averaging. Adding to your portfolio at set intervals, say monthly or quarterly, helps to build a habit of regular investing regardless of what the market or economy seem to be doing. It also keeps your attention on the long term, not the latest headlines that are mostly just a distraction at the end of the day.

Investors worried about the market's latest turmoil should remember these three things to maintain the right mindset moving forward.

Should you invest $1,000 in S&P 500 Index right now?

Before you buy stock in S&P 500 Index, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and S&P 500 Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA), an icon in the world of artificial intelligence (AI), has generated huge wealth for its long-term shareholders. In just the last five years, its shares have surged 1,610% (as of April 9), driven by ridiculous demand for its graphics processing units (GPUs). This trend shows no sign of slowing down.

However, things haven't been so smooth for its investors over the past few months. At the time of this writing, the AI stock is trading about 24% off the all-time high it hit in January amid a volatile market sell-off. But when pessimism and fear are in the air, some stocks can become oversold. Could that be the case here? Is Nvidia a no-brainer buying opportunity right now?

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Powering the AI trend

Training and powering all the AI models that have hit the market requires advanced computing solutions. Nvidia sells the GPUs that provide just the sort of high-speed computational power those applications demand. In its fiscal 2025 fourth quarter, which ended Jan. 26, 91% of its revenue came from the data center segment, which is experiencing a massive surge in demand. Nvidia has taken a commanding lead in the AI chip segment, where it holds the vast majority of the market.

Nvidia's growth trajectory will probably be the subject of numerous business school case studies in the future. Its revenue increased 78% from $22.1 billion in its fiscal 2024 Q4 to $39.3 billion in its most recently ended fiscal quarter. This was supported by cloud infrastructure providers that are boosting their AI capabilities to better serve their customers. Nvidia's revenue in its fiscal 2025 was 12-fold higher than just five years before.

If you think Nvidia's top-line growth is impressive, look further down the income statement. This insanely profitable company's net income in the fourth quarter was 56% of sales. The operating leverage inherent in this business model is clear.

Nvidia's strengths and threats

A company doesn't reach a $2.4 trillion market cap without doing some things right. There are important factors that position Nvidia well in its industry.

The first is its ability to innovate. Nvidia has historically introduced new GPU architectures at a rapid pace. Before it debuted its current cutting-edge Blackwell architecture, its Hopper and Lovelace lines were the best-in-class offerings of their periods, catering to the needs of customers and providing tangible improvement upon previous GPU generations.

Nvidia has also developed a wide and multifaceted economic moat. One factor in its economic advantage is its unmatched technological know-how in terms of GPU design, in addition to the tools needed for developers to use this hardware. This has given it a huge lead in the industry.

Another area of competitive strength comes from its CUDA software platform -- a computing platform and application programming interface that allows developers to get the most speed and power out of its GPUs, and make it easier for AI experts to develop models. The result is that Nvidia also benefits from switching costs. CUDA only works with Nvidia's hardware. Developers who become expert in programming on that proprietary platform will be less likely to want to buy competitors' chips.

Apple has become arguably the world's most successful company because it has developed a beautiful balance between its hardware and software offerings. Nvidia is doing something similar.

Despite these positive characteristics, Nvidia still faces some noteworthy financial risks. Top hyperscaler clients like Amazon and Alphabet are working on their own AI accelerator chips.

What's more, it's easy to imagine that Nvidia's revenue could take a severe hit in an economic downturn. A substantial amount of money is being spent on AI. Some of these capital outlays will likely be delayed or canceled in a recession.

The tariff dip

President Donald Trump's ongoing tariff announcements and threats have sent shock waves through the global financial markets. Tech stocks have taken some of the biggest hits. The "Magnificent Seven" are all trading well off their peaks. It looks like the narrative of the AI boom is looking less compelling in the face of broader macroeconomic concerns.

Yet Nvidia's valuation might be too tempting to ignore. The stock trades right now at a forward price-to-earnings (P/E) ratio of around 25. It has rarely been close to that cheap in the past couple of years. It can be mentally challenging to buy shares in AI companies when macro conditions are so volatile and uncertain. However, increasing your portfolio's exposure to the AI trend by opening a small position in the leading GPU provider now makes sense.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

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See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.