After a dip in July, shares of Nvidia (NVDA -0.84%) have recovered and are up nearly 200% year to date as of this writing. Wall Street remains very bullish on the company’s prospects as 2024 draws to a close.

Nvidia has new products coming to market to meet the demand for artificial intelligence (AI) workloads in data centers, which should fuel another year of strong growth in calendar 2025. But beyond the near term, there is one important reason the stock remains a solid buy-and-hold investment.

The data center market is huge

Zooming out, Nvidia estimates $1 trillion of data center infrastructure will switch from traditional computing to hardware optimized for AI, or what the company calls accelerated computing. This transition has been the foundation of Nvidia’s accelerating growth over the last few years.

When OpenAI launched ChatGPT in 2022, leading cloud service providers and researchers realized they needed to jump on this opportunity, and that created tremendous demand for graphics processing units (GPUs), which are required to train AI models. Nvidia is on track to grow revenue 106% to $126 billion in fiscal 2025, while Wall Street analysts are forecasting 42% revenue and earnings growth next year.

This growth will likely push the stock to new highs. The shares trade at a forward price-to-earnings ratio of 52, but that multiple drops to 37 when accounting for the fiscal 2026 consensus earnings estimate. As Nvidia captures more of that $1 trillion data center opportunity, the stock can still deliver handsome returns from here.

But there are a few risks to keep in mind. The semiconductor industry is prone to swings in demand depending on various factors, such as the health of the economy and capital spending trends by cloud service leaders. However, in the long term, Nvidia’s innovation will keep it in the driver’s seat of the GPU market, where it has been for almost 20 years. The stock still looks like a solid long-term buy.