Investors love Nvidia (NASDAQ: NVDA) and with good reason. The shares are up a stunning 840% in the last five years. I hold a small position myself, and only wish I’d bought more.
This is the ultimate picks-and-shovels stock, selling the chips and infrastructure that power the artificial intelligence boom. Unlike many companies spearheading the AI revolution, it’s also making big profits, at an accelerating pace.
- 2025 – $72.9bn
- 2024 – $29.8bn
- 2023 – $4.4bn
- 2022 – $9.8bn
- 2021 – $4.3bn
Despite that, I wouldn’t buy Nvidia today. Nor would I buy Space Exploration Technologies Corporation, aka SpaceX. Elon Musk’s venture has stellar prospects yet reportedly lost nearly $5bn in 2025. Instead, I’m looking for opportunities much closer to home.
Could AI spending become a problem?
I’m wary of Nvidia because investors are still working out whether the costs of the AI revolution will outweigh the benefits. The investment is enormous, and the returns uncertain. If companies spend hundreds of billions building AI infrastructure but customers don’t pay enough for it, today’s valuations could plummet. Nvidia would inevitably be swept up in that.
Talk of a crash may prove overdone. US tech has proven to be pretty resilient. Today, Nvidia doesn’t look outrageously expensive with a price-to-earnings ratio below 30, but I don’t think this is the moment to rush in. It’s a different story with Barclays (LSE: BARC). I’m itching to buy it.
I’ve been on a FTSE 100 bank buying spree recently, snapping up NatWest Group and HSBC Holdings in May and June. I thought they were too cheap to ignore. I think there’s space in my portfolio for Barclays too.
Why do I prefer Barclays right now?
Barclays shares have behaved almost like a tech stock, rising 50% in a year and 197% over five. Reinvested dividends will have lifted the total return towards 220%. Despite that, it still looks good value, with a modest forward P/E ratio of just 9.7. That’s comfortably below the FTSE 100 average of 16.
Profits have been rising steadily, although the pace of growth may seem somewhat sluggish compared to Nvidia.
- 2025 – £9.1bn
- 2024 – £8.1bn
- 2023 – £6.6bn
- 2022 – £7.0bn
- 2021 – £8.4bn
Many investors buy UK banks for the dividend income, but Barclays prefers to reward shareholders through share buybacks. Despite that, it’s forecast to yield 2.96% this year, rising to 3.63% in 2027. Barclays plans to return around £15bn to shareholders between 2026 and 2028, through a combination of the two.
Shadow banking remains a concern. Barclays recently took a £228m impairment charge from the collapse of UK shadow bank Market Financial Solutions, and more could follow. It also has exposure to volatile global markets and investment banking. If the AI boom turns into a bubble and bursts, banks won’t escape the damage. Higher interest rates could also squeeze mortgage demand, while falling rates could pressure net interest margins.
Yet Barclays is at the top of my watchlist, and I’ll seriously consider adding it to my portfolio the moment I have spare cash. Nvidia is on my list too. But I’ll wait to see what the next few weeks brings.
Should you invest £5,000 in Barclays Plc right now?
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Harvey Jones owns shares in Nvidia.
