The past five years have been incredibly rewarding for Nvidia investors. The company's stock has experienced phenomenal growth, turning a $1,000 investment in January 2019 into $14,550 as of today. But what does the future hold for Nvidia? Where will its stock be in five years?
Nvidia's Rapid Growth Trajectory
Nvidia's impressive stock price jump in the past decade can be attributed to its outstanding revenue and earnings growth. The company has capitalized on various catalysts such as the booming demand for gaming hardware, high-performance computing applications, semiconductors in cars, and the need for graphics cards for training AI models.
Looking ahead, Nvidia is positioning itself for even stronger returns in the next five years through its aggressive product roadmap. The company aims to tap into multiple multi-billion-dollar opportunities, with a projected $1 trillion revenue opportunity across several end markets, including automotive, gaming, enterprise software, and chips and systems.
Considering that Nvidia is on track to finish fiscal 2024 with $59 billion in revenue, it's highly likely that its revenue and earnings growth will accelerate significantly in the next decade as it delves deeper into its addressable market. Let's explore the reasons behind this growth and where Nvidia's stock could be in five years.
Nvidia's Eye-Popping Growth
When Nvidia reported its fiscal 2019 results five years ago, the company generated annual revenue of $11.7 billion. If Nvidia's fiscal 2024 forecast holds true, its revenue will increase 5 times in just five years, representing a compound annual growth rate (CAGR) of 38%. If Nvidia maintains a similar CAGR over the next five years, its annual revenue could reach a staggering $295 billion in fiscal 2029.
However, some Wall Street analysts believe that Nvidia could perform even better. Vijay Rakesh, an analyst at Mizuho, predicts that Nvidia could generate annual revenue of $300 billion in 2027 from AI chip sales alone, thanks to its solid 75% share of this rapidly growing market. This may seem ambitious, but the market for AI chips is poised for significant growth.
Nvidia's biggest rival, Advanced Micro Devices, estimates that the AI accelerator market could reach $400 billion in 2027, a massive jump from last year's estimate of $45 billion. Despite competitors' efforts, analysts at Citi believe Nvidia will maintain a dominant 90% share of this market in the next two to three years.
Nvidia has been investing heavily in AI chip innovation, ensuring it stays ahead of the curve. Therefore, even if Nvidia's market share falls to 75% as predicted by Rakesh, it can still achieve the $300 billion revenue target, given the projected market size of $400 billion.
In addition to AI chip sales, Nvidia is expanding its reach beyond the AI accelerator market. The company recently unveiled consumer-focused graphics cards that allow users to run AI applications directly on their desktops and laptops. This move aligns with the growing demand for AI-capable devices, which is expected to generate $143 billion in annual revenue by 2032.
Considering these promising factors and other catalysts, it's highly probable that Nvidia's revenue will approach $300 billion in five years, leading to substantial gains for investors.
Promising Returns for Investors
Based on Nvidia's five-year average price-to-sales ratio of 20, we can assume that the company's revenue growth over the next five years will match its previous rate. If we use a sales multiple of 20 with a projected revenue of $300 billion, Nvidia's market cap could reach a staggering $6 trillion. This would be significantly higher than its current market cap of around $1.35 trillion.
However, if we consider Nvidia's discounted forward price-to-sales ratio of 14, its market cap could still increase to a remarkable $4.2 trillion with the projected revenue estimate. This scenario points toward a three-fold increase in Nvidia's stock price over the next five years.
These projections strongly indicate that Nvidia's stock will experience substantial growth and provide a significant return on investment for shareholders. It is undoubtedly a top growth stock to consider adding to your portfolio right now.
In conclusion, Nvidia has established itself as a market leader with a strong growth trajectory. With its dominant position in the AI chip market, expanding product offerings, and multiple revenue opportunities on the horizon, Nvidia stock is poised for another five years of exceptional performance.