If you had invested $5,000 in Nvidia (NASDAQ: NVDA) a decade ago, your investment would now be worth over $1.24 million. Nvidia, known for its gaming and data center graphics processing units (GPUs), has created a cornucopia of millionaires as its GPU sales soared.
However, standing tall with a market cap of $2.9 trillion, Nvidia now holds the position as the third-largest publicly traded company globally, following in the massive shadows of tech titans like Apple and Microsoft. The question that now looms large is – can Nvidia recreate the magic of turning a new $5,000 investment into another million-dollar bonanza over the next decade?
Image source: Getty Images.
The Rise of Nvidia’s Stock: A Closer Look
Nvidia has solidified its position as the dominant force in manufacturing discrete GPUs for high-end PCs and servers. These versatile GPUs find their application in high-end gaming, photo and video editing software, cryptocurrency mining, as well as processing complex artificial intelligence (AI) tasks.
While Nvidia traditionally relied heavily on revenue from the PC market, its data center business has emerged as the new star, outshining its PC gaming segment as corporations rush to upgrade their servers for advanced AI applications. A plethora of eminent AI companies, such as Microsoft, OpenAI, and Alphabet’s Google, have all hopped on the Nvidia bandwagon, utilizing its superior chips for their operations.
From fiscal 2014 to fiscal 2024, Nvidia witnessed staggering revenue growth at a compound annual rate of 31%, while its earnings per share (EPS) surged at a CAGR of 50%. Initially driven by the expansion of its gaming GPU business, aided by the crypto mining boom, the data center segment eventually took the reins as Nvidia’s primary growth engine. This led to a significant acceleration in Nvidia’s growth in fiscal 2024, supercharged by the explosive AI market.
Metric | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|---|---|
Revenue growth | (7%) | 53% | 61% | 0% | 126% |
EPS growth | (35%) | 55% | 129% | (56%) | 600% |
Data source: Nvidia. Chart by author.
From fiscal 2022 to fiscal 2024, the proportion of Nvidia’s revenue coming from data center chips doubled from 39% to 78%. This figure further climbed to 87% in the first half of fiscal 2025, consolidating Nvidia’s position as a go-to player for AI-centric data center chips.
Evaluating the Bull and Bear Scenarios for Nvidia’s Future
The optimists foresee Nvidia’s growth trajectory continuing unabated as the market’s hunger for innovative AI chips outpaces supply. Propelled by nearly unmatched pricing power in the burgeoning market, Nvidia’s gross margins, which expanded from 62% in fiscal 2020 to 72.7% in fiscal 2024, are expected to further burgeon. Added to this, the company’s stock is viewed as reasonably valued at 32 times next year’s earnings.
Conversely, the skeptics anticipate a slowdown in Nvidia’s growth as the fervor around AI subsides, challengers like AMD gain traction, and stricter export restrictions hinder sales to China. Furthermore, many of Nvidia’s top clients are venturing into developing their own AI accelerator chips to lessen reliance on the chip giant.
It is worth noting that Nvidia’s insiders have sold ten times more shares than they have purchased over the past year, pointing to potentially limited upside for the stock.
Can Nvidia Spearhead Million-Making Returns in the Next Decade?
Analysts project Nvidia’s revenue and EPS to surge at a CAGR of 50% and 56%, respectively, from fiscal 2024 to fiscal 2027. This meteoric growth is largely expected to be propelled by the sizzling generative AI market, forecasted by Fortune Business Insights to grow at a CAGR of 40% from 2024 to 2032.
If Nvidia aligns with Wall Street’s forecasts, maintains a slower EPS CAGR of 30% from fiscal 2027 to fiscal 2035, and retains a price-to-earnings ratio of 30, its stock price could catapult 840% to $1,110, propelling its market cap to $27 trillion by 2034.
However, even under the most optimistic scenario, turning a $5,000 investment into $1 million would necessitate an investment of approximately $106,000 today. While Nvidia may still hold the key to millionaire status for those willing to wager such a substantial sum on a single stock, replicating the astronomical gains of the past decade seems improbable.
Realistically, Nvidia’s growth trajectory may temper over the next ten years as the AI market matures and fresh contenders carve out their niches in the sector. External factors like a global economic downturn or unforeseen macroeconomic and regulatory challenges could also buffet Nvidia’s growth trajectory. Thus, investors are advised to remain cognizant of these risks, rather than banking solely on Nvidia’s scorching stock performance to endure.
Should You Place $1,000 in Nvidia Stock Today?
Before diving into Nvidia stock, it’s prudent to ponder this:
The Motley Fool Stock Advisor analyst team has recently pinpointed what they perceive as the 10 best stocks for investors to invest in presently… and Nvidia is conspicuously absent from the list. These chosen 10 stocks are anticipated to yield substantial returns in the forthcoming years.
Reminisce about the time when Nvidia made its grand debut on this list on April 15, 2005… if you had heeded the call and invested $1,000, you would be reveling in $729,857 today!*
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