Nvidia is undoubtedly the hottest tech stock, but some of the excitement surrounding it (NVDA -2.25%) It seems to have gotten cooler in the past few weeks. For now, it’s not enough for the company to announce big numbers. Not enough to easily beat Wall Street’s lofty expectations. For Nvidia to really move the needle, it needs to blow it out of the water.
While many investors may be disappointed by the nearly 8% drop since before the release of the company’s results through December 10, short-term price movements don’t really matter in the scheme of things. So let’s zoom out and see where Nvidia’s stock will be in five years’ time.
The company is still delivering
It may be old news at this point, but it’s worth repeating. The field of artificial intelligence (AI) is huge and rapidly growing, and is likely to dominate the market for years to come. You don’t have to fully embrace the industry’s loftiest promises to understand that this technology holds immense potential. There are many promises. PwC, one of the “Big Four” accounting firms, predicts that AI could contribute $15.7 trillion to the global economy by 2030.
Nvidia is at the center of it all, and not just through its chips. As new industries boom, companies with a true vision of what’s possible are leading the charge. For now, Nvidia is that company. Under the leadership of Founder and CEO Jensen Huang, Nvidia has continued to stay ahead of the curve for many years. It is an intangible thing that does not appear in financial statements.
Still, tangible things matter, and Nvidia continues to dominate there as well. The company’s chips power the industry, and its latest version, Blackwell, is in greater demand than ever. With the Blackwell rollout, Nvidia appears poised to continue last year’s double-digit quarter-over-quarter growth.
The only downside to the third-quarter guidance was that gross profit was expected to decline slightly over next year as NVIDIA ramps up Blackwell production. But this is a really fine point. NVIDIA’s gross profit margin last quarter was an astounding 74.6%, and the company’s CFO said at an earnings conference that it would temporarily drop to the “low 70s,” but return to the “mid 70s” in the second half. He said it would be. That year.
Opportunities are in front of us, but there are also some hurdles
It’s clear that things are going as well as they can at the moment. But as investors look to the future, Nvidia faces some challenges.
On a more macro level, questions still hang over the industry as to whether the return on investment is really worth it. Although the question seems less compelling than it was a few months ago, and observers have seen some more evidence of real-world value, skepticism persists. Companies like Alphabet and Microsoft are spending record amounts (more than $50 billion) on capital spending this year, much of it on AI infrastructure.
The industry is in the midst of an AI arms race and no one wants to be left behind, but shareholders of these companies have no choice but to endure these expenses for a long time until proven benefits become clear. you can’t. If this spending dries up, Nvidia’s bottom line will suffer. I think it will be a long time before this becomes a real threat to the industry, but it will be interesting to see if there is a change in sentiment in the leadership of these companies.
Looking closely, Nvidia faces competition from other chipmakers who want a piece of the action. AMD, with a new line of chips that roughly rivals Nvidia’s offerings, is a clear No. 2, but that’s not the only threat.
But for now, Nvidia’s hardware is still the best, and while that’s important, the company’s real moat is CUDA, the software that comes with the hardware. Nvidia has created an ecosystem that makes using their products easier and more efficient.
What will the future hold?
A lot can happen in five years, especially in the markets, and while no one can predict the future, investors can make educated guesses. Although it will face some challenges along the way, Nvidia’s market position, its technological superiority, and its leadership vision position the company to continue outperforming the market over the next five years. I believe it can be done.
Suzanne Frey, an Alphabet executive, is a member of the Motley Fool’s board of directors. Johnny Rice has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Microsoft, and Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
