The past two years have been truly incredible for Nvidia (NVDA -1.15%) The graphics card specialist’s stock price soared 736% in the period, making it a big hit among investors as it became clear that the company would play a central role in popularizing artificial intelligence (AI).
Nvidia’s impressive earnings can be justified by its rapid growth in revenue and profits during this period as a result of its dominant position in the AI chip market. The good news is that NVIDIA looks likely to be able to maintain its impressive gains over the next three years, especially after comments made by management on the company’s recent earnings call.
Let’s take a look at why Nvidia investors can expect more gains from this fast-rising semiconductor stock.
Nvidia is making the right moves to take advantage of huge demand for its chips
When Nvidia announced its fiscal 2025 third-quarter financial results (three months ending October 27) on November 20, it reported a record revenue of $35.1 billion. The company’s sales increased 94% year over year. This was primarily due to a 112% jump in data center revenue to $30.8 billion.
Nvidia originally expected third-quarter revenue to be $32.5 billion, but the company significantly exceeded that estimate thanks to aggressive production increases for its next-generation Blackwell processors. The company has seen “tremendous demand” for its Blackwell AI chips, which is why it is “competing to scale supply.”
It’s no surprise why demand for Blackwell is so solid. After all, recent tests show that Nvidia’s latest generation of AI processors can deliver a 2.2x performance increase over the previous generation of Hopper chips. Additionally, this significant performance increase is accompanied by lower computing costs. CFO Colette Kress points out:
Running the GPT-3 benchmark requires 64 Blackwell GPUs, a 4x cost reduction compared to 256 H100.
So Nvidia is doing the right thing by ramping up production of Blackwell processors, even if it’s taking a short-term margin hit in the process. The company expects non-GAAP (adjusted) gross margin for the current quarter to be 73.5%, down from 76.7% in the year-ago period. But Kress points out that once production of Blackwell processors is fully ramped up, Nvidia’s gross profit margins will return to mid-’70s levels.
Japanese investment bank Mizuho recently increased its 2025 GPU sales forecast for NVIDIA by 10% to 30 million units, citing growing demand for these chips in gaming, data centers, and AI. This explains why consensus estimates are currently predicting strong growth in Nvidia’s fiscal years 2025 and 2026.
NVDA earnings forecast data for this year by YCharts
Product roadmap could help stock price rise significantly over the next three years
One of the main reasons why Nvidia is able to maintain its incredible dominance in the GPU market is the technological advantage it enjoys over its competitors. With companies like AMD playing catch-up, Nvidia has taken the lion’s share of the AI chip space, pulling away from its competitors. The good thing is that Nvidia has an aggressive product roadmap that helps it maintain its lead in this lucrative field.
For example, Nvidia’s Blackwell processors are expected to be succeeded by chips based on the Rubin architecture in the first half of 2026. Analysts estimate that Nvidia will use Taiwan Semiconductor Manufacturing Co.’s 3 nanometer (nm) process node to manufacture the Rubin chips. This will be an improvement over Blackwell’s 4NP process node, which is an enhanced version of TSMC’s 5nm process.
A smaller process node means Nvidia can cram more transistors into a compact area, ideally leading to increased computational power and reduced power consumption. So it’s probably no surprise that Rubin would help Nvidia maintain its technological edge over competitors in the AI chip market and maintain its incredible pricing power in the space.
The AI chip market is expected to generate a whopping $500 billion in revenue in 2028, and Nvidia’s dominance in this market is likely to translate into strong sales and earnings growth, according to AMD. That’s it. As mentioned earlier, this is why analysts have raised their growth expectations for the company for this fiscal year and next.
A similar trend is seen in 2027 (which coincides with most of the 2026 calendar year).
NVDA EPS estimates for current year data by YCharts
The chart above shows that analysts expect Nvidia to deliver earnings of $5.55 per share in fiscal 2027. Assuming the company was trading at 40.8 times earnings at the time (consistent with the five-year average forward earnings multiple), the stock price reached $226 in a few years. This would be a 67% increase from current levels.
Investors can buy this AI stock at an attractive valuation now, considering Nvidia currently trades at 36 times forward earnings. The company may not want to miss out on this opportunity, as it has the potential to deliver even bigger profits if the market decides to reward its impressive growth. It has a richer multiple.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
