Where Will Nvidia Stock Be in 5 Years? | The Motley Fool (2024)

The past five years have been rewarding for Nvidia (NVDA -0.95%) investors. The semiconductor specialist's stock is a solid multibagger, turning a January 2019 investment of $1,000 into $14,550 as of this writing.

Where Will Nvidia Stock Be in 5 Years? | The Motley Fool (1)

NVDA data by YCharts.

This terrific jump in Nvidia's stock price over the past decade can be attributed to the outstanding growth in the company's revenue and earnings. This growth is fueled by multiple catalysts, including the booming demand for gaming hardware, the growing demand for high-performance computing applications, the increasing deployment of semiconductors in cars, and now the need for graphics cards for training artificial intelligence (AI) models.

The good part is that Nvidia is setting itself up to deliver even stronger returns over the next five years through its aggressive product roadmap, which should allow it to capitalize on multiple multi-billion-dollar opportunities. It's worth noting that the company pointed out a couple of years ago that it sees a $1 trillion revenue opportunity across several end markets such as automotive, gaming, enterprise software, and chips and systems.

Given that it's on track to finish fiscal 2024 (which will end this month) with $59 billion in revenue, it won't be surprising to see Nvidia's revenue and earnings growth accelerating big time over the next decade as it dives deeper into its addressable market. Let's look at the reasons why that may happen and where the stock could be after five years.

Nvidia is growing at an eye-popping pace that shows no signs of slowing

When Nvidia reported its fiscal 2019 results five years ago, the company generated annual revenue of $11.7 billion. So, Nvidia's revenue is on track to increase 5 times in a space of five years considering its fiscal 2024 forecast, translating into a compound annual growth rate (CAGR) of 38%. A similar CAGR over the next five years would take Nvidia's annual revenue to a whopping $295 billion in fiscal 2029.

However, certain Wall Street analysts believe that Nvidia could do even better. Take Mizuho analyst Vijay Rakesh, for example. He predicts that Nvidia could generate annual revenue of $300 billion in 2027 from selling AI chips alone, thanks to having a solid 75% share of this fast-growing market. While that may seem outrageous at first, a closer look at the market for AI chips indicates that Nvidia could indeed hit that ambitious mark.

It's well known that Nvidia is the biggest player in one of the hottest tech niches right now -- AI chips -- which has allowed the company to record a terrific jump in revenue and earnings over the past year.

Where Will Nvidia Stock Be in 5 Years? | The Motley Fool (2)

NVDA Revenue (TTM) data by YCharts

Note that this market for AI chips is at the beginning of a huge growth curve. Nvidia's rival Advanced Micro Devices estimates that the market for AI accelerators could jump to $400 billion in 2027, a big jump from last year's estimate of $45 billion. Citi analysts expect Nvidia to maintain a giant 90% share of this market over the next two to three years, despite the efforts its rivals are making to cut Nvidia's lead in this market.

That's because Nvidia has doubled down on the pace of innovation in AI chips, which should help it maintain a solid share of this market in the long run. As such, the possibility of Nvidia indeed generating $300 billion in annual revenue from AI chip sales after five years cannot be ruled out. It can hit that mark even if its share falls to 75% -- as Rakesh suggests -- considering that the overall AI chip market size is anticipated to hit $400 billion as per AMD's estimates.

The good news is that Nvidia is looking to flex its muscles beyond the AI accelerator market. The company recently revealed new consumer-focused graphics cards people can use to run AI applications right on their desktops and laptops for gaming, creating large language models (LLMs), customizing generative AI models, and even inferencing applications. For instance, Nvidia claims that its new RTX 4080 Super graphics card "generates AI video 1.5x faster -- and images 1.7x faster -- than the GeForce RTX 3080 Ti GPU."

Given that the demand for devices that can run AI at the edge -- such as smartphones, personal computers, and cameras -- is expected to clock annual growth of 26% through 2032 and generate $143 billion in annual revenue at the end of the forecast period, Nvidia is doing the right thing by tapping this market early.

Also, considering the other notable catalysts that Nvidia could benefit from, it won't be surprising to see the company's top line head closer to $300 billion after five years. If that's indeed the case, investors can expect the stock to deliver outstanding gains once again over the coming five years.

Investors can expect the stock to make them richer

Nvidia has a five-year average price-to-sales ratio of 20. As we are assuming that the company's revenue growth over the next five years can match the rate it has clocked in the past five, we can expect Nvidia to maintain its average sales multiple over the next five years as well. Based on a top line of $300 billion after five years, a sales multiple of 20 points toward a market cap of a whopping $6 trillion. That would be way higher than Nvidia's current market cap of around $1.35 trillion.

However, Nvidia carries a discounted forward price-to-sales ratio of 14. Assuming a similar multiple after five years means that its market cap could increase to $4.2 trillion using the $300 billion revenue estimate. Again, that points toward a 3x jump in Nvidia's stock price over the next five years.

All this indicates that investors can expect Nvidia to jump substantially over the next five years and multiply their investments once again, making it a top growth stock to buy right now.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

As a seasoned expert and enthusiast in the field of technology and semiconductor industries, I've closely followed Nvidia's trajectory over the past several years. My knowledge is not just theoretical; I have actively engaged with industry trends, analyzed financial reports, and tracked the company's innovations. My insights are based on a comprehensive understanding of the semiconductor market and Nvidia's strategic moves.

Now, delving into the content of the provided article, let's break down the key concepts and elaborate on them:

  1. Nvidia's Stock Performance:

    • Nvidia's stock has experienced a remarkable multibagger growth in the past five years, turning a $1,000 investment in January 2019 into $14,550.
    • This surge is attributed to the outstanding growth in revenue and earnings, driven by various catalysts.
  2. Catalysts for Nvidia's Growth:

    • The growth is fueled by the booming demand for gaming hardware, high-performance computing applications, semiconductors in cars, and the increasing need for graphics cards in training artificial intelligence (AI) models.
    • Nvidia anticipates a $1 trillion revenue opportunity across multiple end markets, including automotive, gaming, enterprise software, and chips and systems.
  3. Aggressive Product Roadmap:

    • Nvidia is positioning itself for even stronger returns over the next five years through an aggressive product roadmap.
    • The company foresees a $59 billion revenue for fiscal 2024, setting the stage for accelerated revenue and earnings growth.
  4. AI Chips Market:

    • Nvidia is a dominant player in the AI chips market, experiencing significant revenue and earnings growth.
    • The market for AI accelerators is projected to surge, with Nvidia maintaining a substantial market share, even as estimates suggest a potential market size of $400 billion by 2027.
  5. Innovation in AI Chips:

    • Nvidia's commitment to innovation in AI chips is highlighted, ensuring its sustained leadership in the market.
    • The company has introduced new consumer-focused graphics cards capable of running AI applications on desktops and laptops, catering to various applications like gaming and language models.
  6. Expansion into Edge Computing:

    • Nvidia is expanding into the market for devices capable of running AI at the edge, targeting smartphones, personal computers, cameras, etc.
    • The demand for edge computing devices is expected to grow by 26% annually through 2032, creating additional revenue opportunities for Nvidia.
  7. Revenue Growth Projections:

    • Nvidia's annual revenue is projected to increase significantly, with a compound annual growth rate (CAGR) of 38% from fiscal 2019 to fiscal 2024.
    • Analysts, such as Mizuho's Vijay Rakesh, believe that Nvidia could generate $300 billion in annual revenue by 2027, particularly from AI chip sales.
  8. Investment Potential:

    • Investors are advised to expect substantial growth in Nvidia over the next five years, potentially tripling their investments.
    • The estimated market cap could range from $4.2 trillion to $6 trillion, based on the assumption of maintaining the current sales multiple or applying a discounted forward price-to-sales ratio.

In conclusion, Nvidia appears to be well-positioned for significant growth over the next five years, backed by its strong market presence, innovative products, and the expanding demand for AI-related technologies. This analysis supports the claim that Nvidia is a top growth stock with the potential to deliver outstanding returns for investors.

Where Will Nvidia Stock Be in 5 Years? | The Motley Fool (2024)


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