The Motley Fool: Powering artificial intelligence – dallasnews.com
Nvidia may be the most well-known artificial intelligence and semiconductor stock on the planet. The tech giant makes the graphics processing units (GPUs) that fuel top AI tasks such as the training of large language models (LLMs), or inferencing — when an AI model applies that training to answer a question or solve a problem.
Nvidia’s early entrance into the AI market gave it a huge advantage, and its focus on innovation has kept it in the top spot. All of this has led to enormous gains in earnings, with revenue and net income climbing by double digits year over year in recent quarters.
Nvidia has powered the early phases of the AI boom, but the company is also well positioned to drive the next chapters. This is because it has tailored its chips to serve inferencing — seen as the next big growth area for AI — and expanded its offerings into a variety of products and services to suit customers’ AI needs.
Nvidia has also made smart strategic moves, such as partnering with Nokia to develop AI for telecom. Just recently, it acquired the inferencing technology of chip startup Groq.
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Nvidia is likely to continue growing briskly as the AI story unfolds. With a reasonable valuation at recent levels, it’s well worth consideration by long-term investors.
(The Motley Fool owns shares of and recommends Nvidia.)
From E.C., Brooklyn, N.Y.: A company I’m invested in wants shareholders to approve it issuing more stock. Why would I support that?
Those who oppose companies issuing more shares of stock worry about the value of existing shares being diluted. To understand dilution, imagine that a company has 100 shares of stock outstanding, and you own 10 shares, or 10%. If it issues 20 more shares, it will have a new total of 120 shares, and your 10 shares will now make up only 8.3% of the company. The value of your stake in the company appears to have dropped.
But if the company uses the money raised to grow its business effectively, shareholders can still win. For instance, if the new shares are issued to buy another company in a sound deal, the acquisition might add much more value to the company than the cost of the additional shares.
From L.P., Spokane, Wash.: Do I need life insurance when I’m single?
Life insurance mainly exists to protect anyone who depends on you financially. That includes your kids, your parents and perhaps even your business.
If no one would be hurt financially if you die, you don’t need it. If you do need life insurance, it’s often best to buy a term life insurance policy, just for the period over which you’ll need it — such as until your kids grow up.
Think twice before buying insurance as an investment, because you can end up with insurance you don’t need and an investment that’s less profitable than many alternatives, such as stocks.
Investors can get rattled when the stock market — or a particular stock — pulls back sharply. But if you’re going to invest in the stock market, you must expect volatility. Fortunately, volatility is generally not a bad thing, as long as you expect and prepare for it.
After all, over many decades, the stock market has kept going up and setting new records — despite occasional big and small pullbacks.
Per Hartford Funds, over the 88 years including 1937 through 2024, stocks advanced in 67 years and retreated in 21. Over the 84 five-year holding periods in that same time frame, stocks were up 90% of the time — and 97% of the time for 10-year holding periods.
Meanwhile, the stock market, as measured by the S&P 500 index of 500 of America’s biggest companies, has averaged annual total returns of close to 10% over nearly 100 years. Those returns vary widely, though: The S&P 500 advanced by double digits each year from 2019 through 2025, except for a double-digit loss of more than 19% in 2022. In any given year, the stock market could jump by 30% or plunge by 35% or post a gain of 1%.
This unpredictability is why you shouldn’t put any money you might need within five years (or 10, to be more conservative) into the stock market. But for long-term dollars, it’s hard to find a better way to build wealth than a low-fee index fund; you just need to invest meaningful sums regularly and stay the course from year to year.
Like the broader market, individual stocks in great companies can have bad years — but as long as they remain promising, if you hang on for many years, you can do well. Market pullbacks tend to last just a few months, and relatively few last more than a year (though a multiyear slump is always possible).
So expect volatility and don’t panic. Instead, try to grab some shares of great companies when they’re on sale — or more shares of solid index funds.
S.B., online: My most regrettable financial move was waiting too long to make decisions regarding a windfall I received as a lump sum of cash.
Ah, procrastination. It has hurt many, if not most, of us. Many people put off saving and investing for college or retirement or some other goal, often because they don’t feel confident about it. (Few of us were ever taught much about investing or money management.)
Suddenly receiving a big cash infusion can also leave us waffling. Procrastination can be costly — with your windfall, for example.
Let’s say that you leave it in a bank account for five years, earning very little, while you put off figuring out what to do with it. If the account grows by an annual average of, say, 1%, you’ll end up with about 5% more in five years.
If it had been in the stock market for those five years, and the market had averaged an annual gain of 7%, your lump sum would have grown by 40%.
Of course, you shouldn’t take any action until you’ve researched your options, perhaps even consulting with a financial adviser or two. Procrastinating is still better than making rash decisions.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
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