Picture this: if you had the foresight to stash away $5,000 in Nvidia (NASDAQ: NVDA) a decade back, your pocket today would jingle with over $1.24 million! The chip juggernaut has been nothing short of a millionaire mint, with its gaming and data center graphics processing units (GPUs) soaring to astronomical heights.
Fast forward to today, Nvidia proudly stands as the world’s third-largest publicly traded company, trailing only behind tech titans Apple and Microsoft with a massive market cap of $2.9 trillion. But could lightning strike twice with a fresh $5,000 investment, paving the way to another $1 million jackpot in the next decade?
Image source: Getty Images.
Charting Nvidia’s Meteoric Rise
At the heart of Nvidia’s stratospheric ascent lies its crown as the world’s foremost producer of discrete GPUs for high-end PCs and servers. These powerful GPUs not only drive top-tier gaming graphics but also supercharge photo and video editing software, fuel cryptocurrency mining, and tackle intricate artificial intelligence (AI) tasks head-on.
Nvidia’s revenue narrative saw a profound evolution over the years. Initially dominated by the PC market, the tides shifted as the data center business outshone its gaming GPU arm, riding the wave of companies upgrading servers to meet the demands of cutting-edge AI applications. Today, the crème de la crème of the AI realm, including heavyweights like Microsoft, OpenAI, and Alphabet’s Google, all swear by Nvidia’s chips.
From fiscal 2014 through fiscal 2024, Nvidia’s revenue growth charted an impressive compound annual growth rate (CAGR) of 31%. Simultaneously, earnings per share (EPS) soared at a CAGR of 50%. Initially buoyed by the gaming GPU expansion complemented by the crypto mining boom, it was the data center business that eventually emerged as the core growth driver. As the AI market erupted in fiscal 2024, Nvidia’s growth trajectory underwent a meteoric acceleration.
|
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.
Between fiscal 2022 and fiscal 2024, the fraction of Nvidia’s revenue stemming from data center chips doubled from 39% to 78%. This proportion escalated to a commanding 87% in the initial half of fiscal 2025, transforming Nvidia into the ultimate bet on AI-centric data center chips.
Riding the Bulls and Ducks
In the bullish camp, believers in Nvidia’s continued growth spree foresee the market’s fervent appetite for fresh AI chips outpacing supply. They bet on the company’s swelling gross margins – escalating from 62% in fiscal 2020 to an eye-popping 72.7% in fiscal 2024 – to persevere as Nvidia wields near-unmatched pricing muscle in the booming market. They argue that the company’s stock appears reasonably priced at 32 times next year’s earnings.
In the bearish corner, doubters project a cooling-off period for Nvidia’s growth as the AI hype fizzles out, rival players like AMD gain turf, and stringent export constraints choke off sales to China. Furthermore, numerous top Nvidia clients are venturing into the realm of developing their AI accelerator chips to lessen their reliance on the chip giant. A glaring pointer to a possible slowdown is Nvidia insiders offloading shares at a rate tenfold higher than their purchases over the past year, indicating a potential cap on upside momentum.
Unveiling Nvidia’s Millionaire Pandora’s Box
Extending out to fiscal 2027, industry analysts envisage Nvidia’s revenue and EPS to samba to a hefty CAGR of 50% and 56%, respectively. This groovy growth trajectory is poised to be steered by the blazing generative AI segment, earmarked by Fortune Business Insights to burgeon at a CAGR of 40% between 2024 and 2032.
If Nvidia dances in rhythm with Wall Street’s tune, fostering EPS expansion at a marginally softer CAGR of 30% from fiscal 2027 to fiscal 2035, and maintains a trading stance at 30 times earnings, the stock’s value could jam its way to an 840% rally, settling at $1,110. This soaring surge would hoist its market cap to a lofty $27 trillion by 2034.
However, amidst this fervent optimism, even in the sunniest scenario, Nvidia would merely magnify a $5,000 investment to $47,000. To recreate the $1 million magic, you’d be looking at an investment outlay of approximately $106,000 today. While Nvidia does harbor the potential to pave the way to millionaire status for those willing to seed that hefty sum into a single stock, replicating the historical 10-year rollercoaster seems an uphill climb.
Reality whispers a cautionary tale, hinting at Nvidia’s growth tempering in the forthcoming decade as the AI arena matures and fresh rivals carve out their niches. Vital indicators reveal that global recession tremors or unforeseen macro and regulatory gusts could ruffle Nvidia’s upward trajectory. Investors ought to heed these omens instead of merely assuming Nvidia’s red-hot stock will perpetually ride its historic stellar streak.
Wading Through Investment Dilemmas
Before you don your investor cap and plunge into Nvidia stock, take a moment to ponder:
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