Discovers a Potentially Skyrocketing Investment Option, Valued at $10 Trillion by 2030, as Perrupted by a 1 Wall Street Analyst
plenty of discussions have taken place regarding the capabilities of artificial intelligence (AI), and rightly so. Ever since the introduction of AI towards the end of the previous year, businesses have been flocking towards this technology. AI promises to elevate processes, create diverse types of content, and significantly escalate productivity. As a consequence, businesses are investing heavily in AI, and spending is increasing at an alarming rate.
In fact, the four major tech giants - Microsoft, Meta Platforms, Alphabet, and Amazon - are expected to invest close to $250 billion in capital expenditures to support AI this year. This spending spree shows no signs of slowing down.
If there's one undeniable beneficiary of this spending frenzy, it's Nvidia (NVDA 3.14%). This company supplies the graphics processing units (GPUs) that are driving the AI revolution and is set to become a founding member of the $10 trillion club by riding this wave.
Beyond its AI capabilities, Nvidia has numerous other growth drivers that could propel the stock to new heights.
From humble beginnings
Nvidia spearheaded the GPU as early as 1999, enabling stunningly realistic images in video games. This was made possible by parallel processing, or the ability to execute numerous mathematical calculations simultaneously. By dividing a computing task into smaller, manageable chunks, Nvidia revolutionized the gaming industry. But this was only the beginning. Nvidia soon adapted this technology to various other applications and paved the way across the tech landscape.
Today, Nvidia GPUs are an essential component in data centers, cloud computing, autonomous driving, machine learning, and most recently, generative AI.
The numbers don't lie
Over the past decade, Nvidia's revenue has skyrocketed by 2,300%, while its net income has climbed by an astonishing 8,460%. Although it's been a thrilling ride, the company's consistent financial performance has fueled impressive growth in its stock price, which has soared 29,050%.
In its fiscal 2025 third quarter (ended Oct. 27), Nvidia reported record revenue of $35 billion, up 94% year over year and 17% sequentially. This drove adjusted earnings per share (EPS) of $0.81, up 103%. The data center segment, which includes chips used in AI, data centers, and cloud computing, was the main driver of the results, with revenue for the segment surging 112% to $30.8 billion. The insatiable demand for AI fueled this growth.
Given this demand, the future looks promising. Analysts at Goldman Sachs Research estimate the market for AI could reach $7 trillion by 2030. Furthermore, with the improving economy, businesses are eager to invest in this groundbreaking technology, a trend that will benefit Nvidia.
Many paths to victory
While AI is undoubtedly Nvidia's biggest opportunity, there are others.
Gaming had long been Nvidia's primary growth market. But its dominance was challenged in recent years by AI. Gaming still accounts for 10% of Nvidia's revenue, and it stands to gain significantly now that the economy is recovering. Inflation took a toll on the gaming industry, with users opting to use their existing graphics cards rather than upgrading. Now, many industry experts believe this pent-up demand is about to be released, triggering a much-anticipated upgrade cycle, particularly during the holiday season.
In the second quarter, Nvidia captured 88% of the discrete desktop GPU market, according to Jon Peddie Research. While the industrywide third-quarter results aren't yet available, Nvidia's dominance is unlikely to change. Moreover, demand for video game processors is expected to surge by 34% over the next five years, climbing from $3.6 billion in 2024 to $15.7 billion by 2029, according to Mordor Intelligence. As the leading provider of cutting-edge gaming processors, Nvidia is well-positioned to reap the benefits of these long-term trends.
We can't overlook the data center market, which was already experiencing solid growth due to the digital transformation. As the demand for cloud computing grows, so too does the need for data centers to support that growth. Nvidia controls an estimated 95% of the data center GPU market, according to CFRA Research analyst Angelo Zino. Furthermore, it's estimated that the data center market will more than double, increasing from $302 billion in 2024 to $622 billion by 2030, a compound annual growth rate of 10%, according to Prescient and Strategic Intelligence Market Research.
While generative AI is currently grabbing headlines, there are established branches of AI that are powered by Nvidia's processors, such as machine learning. Nvidia commands an estimated 95% share of this market, according to New Street Research.
Nvidia's dominance and the expectation of continued growth in each of these markets provide the company with numerous additional growth opportunities.
The road to $10 trillion
Currently, Nvidia boasts a market cap of about $3.58 trillion, which would mean a stock price increase of 179% to reach a $10 trillion valuation. According to Wall Street, Nvidia is projected to generate revenue of nearly $126 billion in fiscal 2025 (which ends in January), giving the stock a price-to-sales (P/S) ratio of approximately 28. Assuming this P/S ratio remains constant, Nvidia would need to generate revenue of around $352 billion annually to support a $10 trillion market cap.
Nvidia is predicted to see a 47% revenue increase annually over the next five years, according to Wall Street, potentially leading the company to hit a $10 trillion market cap by as early as 2028. While this might sound ambitious, many, including Beth Kindig, CEO and lead tech analyst for the I/O Fund, believe it's merely a matter of time. Kindig estimates that Nvidia will reach a $10 trillion market cap by 2030.
We believe Nvidia can reach this lofty valuation by 2030, or even sooner, through a swift product development schedule, its unbreakable moat due to the CUDA [Compute Unified Device Architecture] software platform, and its status as a leading AI systems company that provides more than just GPUs – including networking and software platforms.
Considering the numerous growth opportunities ahead and the quickening pace of AI adoption, Kindig's analysis seems spot on.
It's important to note that Nvidia isn't for the risk-averse. During the summer, the stock tumbled 27% in only six weeks between June and July, as rumors swirled about potential delays in launching its AI-focused Blackwell chips. However, calm prevailed, and the stock climbed to new heights once more. The message remains clear, though.
Wall Street anticipates Nvidia to post an EPS of $4.20 in fiscal 2026, which commences in late January. This translates to approximately 33 times forward earnings (at this point in time). I see this as a reasonable price to pay for a firm that supplies top-tier processors powering one of the most significant technology shifts in recent memory.
Businesses are not only investing heavily in AI but also increasing their spending at an alarming rate, driven by the potential of AI to elevate processes, create content, and significantly boost productivity. This trend has led to tech giants like Microsoft, Meta Platforms, Alphabet, and Amazon spending near $250 billion in capital expenditures to support AI this year.
Given the expectations for the AI market to reach $7 trillion by 2030 and the improving economy, analysts believe that businesses will continue to invest heavily in this groundbreaking technology, benefiting companies like Nvidia, which is well-positioned to profit from this growth due to its dominance in the GPU market.
