A number of growth drivers and strong tailwinds combine to propel this artificial intelligence (AI) pioneer further.
Much has been made about the potential of artificial intelligence (AI), and for good reason. Since the dawn of AI early last year, businesses have flocked to the technology with the promise of streamlining processes, creating all kinds of original content, and dramatically increasing productivity. This potential has driven businesses to reap the benefits of AI, and spending is increasing at a breakneck pace.
Indeed, spending by the Four Horsemen of big tech companies – Microsoft, Metaplatform, Alphabet, and Amazon – is expected to reach nearly $250 billion in capital spending to support AI this year, with no end in sight.
If there’s one clear beneficiary of all this spending, it’s Nvidia (NVDA -3.22%). The company supplies the graphics processing units (GPUs) that power the AI revolution, and it’s likely to ride the wave and become a founding member of the $10 trillion club.
But beyond its AI capabilities, Nvidia has a number of other growth drivers that could help propel the stock to new heights.
Image source: Getty Images.
From humble beginnings
Nvidia developed GPUs in 1999 to render lifelike images in video games. This is possible thanks to parallelism, the ability to perform many mathematical calculations simultaneously. Nvidia revolutionized the industry by breaking down computing tasks into smaller, more manageable bits. But that was just the beginning. The chipmaker quickly pivoted and applied the same technology to many other applications, launching a breakthrough across the tech world.
Nvidia GPUs are now a staple in data centers, cloud computing, autonomous driving, machine learning, and more recently, generative AI.
the numbers speak for themselves
Over the past decade, Nvidia’s revenue has increased 2,300% (as of market close on Wednesday), and its net income has surged 8,460%. Despite a rollercoaster ride, the company’s consistently strong financial performance led to impressive growth in the stock price, which soared 29,050%.
In the third quarter of fiscal 2025 (ending October 27), Nvidia achieved record revenue of $35 billion, up 94% year-over-year and 17% sequentially. This resulted in adjusted earnings per share (EPS) of $0.81, an increase of 103%. Driving the results was the data center division, which includes chips used in AI, data centers and cloud computing. The segment’s revenue increased 112% to $30.8 billion, driven by unquenchable demand for AI.
Given the demand, the runway ahead is long. Analysts at Goldman Sachs Research estimate that the AI market could exceed $7 trillion by 2030. Additionally, the improving economy is increasing companies’ appetite to invest in this new and innovative technology, a trend that will benefit Nvidia.
Different ways to win
While expanding the adoption of AI is clearly the biggest opportunity for Nvidia, there are other opportunities as well.
Before the advent of AI, gaming had long been a major growth industry for Nvidia. That has changed over the past few years as that dominance has been usurped by AI. The segment still accounts for 10% of Nvidia’s revenue and could see significant upside now that the economy is on the mend. Inflation hurt the gaming business as users bided their time and made do with their existing graphics cards until conditions improved. Many industry experts now believe that pent-up demand is about to be released, especially in the lead-up to the holiday season, triggering a long-awaited upgrade cycle.
According to Jon Peddie Research, Nvidia captured 88% of the discrete desktop GPU market in the second quarter. Industry-wide Q3 results have not yet been released, but Nvidia’s dominance is expected to remain. Additionally, demand for video game processors will skyrocket over the next five years, jumping from $3.6 billion in 2024 to $15.7 billion by 2029, at a compound annual growth rate (CAGR) of 34%, according to Mordor Intelligence. It is expected that Nvidia, a leading provider of cutting-edge gaming processors, could benefit from these long-term tailwinds.
Let’s not forget the data center market, which was already experiencing strong growth thanks to digital transformation. As the demand for cloud computing grows, so 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. Additionally, the data center market is estimated to more than double, reaching $622 billion by 2030 from $302 billion in 2024, with a compound annual growth rate of 10%, according to Prescient and Strategic Intelligence Market Research. I am.
Generative AI is grabbing all the headlines, but there are also established areas of AI powered by Nvidia’s processors, including machine learning. The company commands an estimated 95% share of the market, according to New Street Research.
Nvidia’s dominance and expectations for continued growth in each of these markets gives the company even more low-hanging fruit.
The road to $10 trillion
Nvidia’s market cap currently stands at about $3.58 trillion, and it would take a 179% share price increase to make it worth $10 trillion. According to Wall Street, NVIDIA is poised to generate nearly $126 billion in revenue in fiscal year 2025 (ending in January), giving it a price-to-sales (P/S) ratio of roughly 28. At this rate, NVIDIA would need to grow its revenue to about $352 billion annually to support its $10 trillion market cap, assuming P/S holds.
Wall Street currently expects Nvidia’s revenue to grow 47% annually over the next five years. If the company can meet that benchmark, it could reach a market cap of $10 trillion as early as 2028. That may seem ambitious, but I’m not alone in believing it’s only a matter of time. Beth Kindig, CEO and chief technology analyst at I/O Fund, calculates that Nvidia will reach a market cap of $10 trillion by 2030.
Nvidia is an AI systems company with a rapid product roadmap, an impenetrable moat with its CUDA (Compute Unified Device Architecture) software platform, and components that go far beyond GPUs, so it could reach market value by 2030 or sooner. We believe the total amount will reach $10 trillion. , including network and software platforms.
Given the multiple avenues for future growth and the rapidly accelerating adoption of AI, I think Kindig has done his homework.
That said, Nvidia is not for the faint of heart. This summer, the company’s stock price fell 27% in just six weeks from June to July following reports that the launch of its AI-focused Blackwell chip could be delayed. Since then, cooler people have become popular and stock prices have reached new heights. But the lesson is valid.
Wall Street expects Nvidia to generate EPS of $4.20 in fiscal 2026, which begins in late January. This equates to approximately 33x expected earnings (as of this writing). I think it’s an attractive price to pay for a company that provides the gold standard processors needed to drive the most important technology change in a generation.
