NVDA is a strong buy; fair value $342 vs price $220 implies 56% upside in 12-18 months due to 70% growth forecast and AI demand, outweighing competition risks.

The next top stock I'm going to recommend and rank up is Nvidia, which I calculated a fair value of $342. The current market price is $220. Given that difference, I calculated an upside of 56% for Nvidia over the next 12 to 18 months.

The company's recently reported quarterly financial results exceeded expectations by several billion dollars and the management team for the first time ever forecasted its annual growth rate for the upcoming fiscal year and the number was explosive at 70%.

Of course, one of the more bullish factors for Nvidia is the tailwinds from artificial intelligence. I already mentioned how much money Amazon and Meta will be spending this year and they also indicated they will increase their spending next year.

Hundreds of billions if not over a trillion dollars will be spent on artificial intelligence next year and a large percentage of those budgets will go to Nvidia.

Furthermore, Nvidia boasts significant competitive advantages in this industry. It boasts an estimated market share of about 80% in the data centers for accelerated computing chips and that difference is accelerating.

I would argue that Nvidia is at least one step ahead of its competition and I wouldn't argue against you if you told me, you know what, no, they're actually like two steps ahead of the competition.

They offer buyers of this technology the full stack. So [snorts] you can get everything you need from one vendor. There are other options available if you want to piece together solutions from several vendors.

And that might be something that companies like Alphabet and Amazon and Meta might be interested in doing because they've developed a certain level of expertise in this industry.

But when we're thinking about institutions and enterprises like Walmart and Home Depot, etc., and government institutions, they're not going to be interested in piecing together these various components from various vendors.

Nvidia offers that full stack, including a very powerful software suite that's not replicated by anyone else. And those competitive advantage should allow Nvidia to continue boasting significant market share.

However, there are some downsides here and one of which is that competition is proliferating. Amazon, Alphabet, Microsoft and others are investing in their own proprietary chips and those chips are doing extremely well internally and externally.

As the data center spending booms and profit margins remain elevated, many many companies will be interested in developing this technology.

And the second bearish factor is industry economics like OpenAI and Anthropic which are losing billions of dollars on the bottom line and the circular financing that's needed so that these companies can continue consuming large amounts of computing power without having to pause and wait until they have sufficient cash to purchase those components.

That's creating a headwind from investors who are concerned about the circular nature of those deals.

Still, even after those factors, I think Nvidia is a great buying opportunity. I own Nvidia stock in my portfolio. It's one of my two largest positions in my portfolio.