Last week, Nvidia (NASDAQ: NVDA) reported solid second-quarter financial results, but the stock is now down 20% from its peak. The decline was fueled by concerns about the sustainability of the artificial intelligence (AI) boom and the delayed launch of Blackwell, Nvidia’s next-generation data center chips.
That represents a dramatic shift in market sentiment for the semiconductor company. Just three months ago, Nvidia announced a 10-for-1 stock split alongside phenomenal first-quarter financial results, and that news sent shares up 20% the following week.
But Nvidia is still on track to be a $10 trillion company by 2030, according to Beth Kendig, lead technology analyst at I/O Fund. She remains bullish on Blackwell and expects an upward revision to the consensus profit estimate for the next fiscal year. “Early next year will be fireworks again for Nvidia, and we’ll be on our way to that $10 trillion mark,” she told Yahoo Finance.
Former hedge fund manager and current Mad Money host Jim Cramer came to the same conclusion a few years earlier. In 2021, he told CNBC’s Halftime Report that Nvidia could eventually become a $10 trillion company, and his belief hasn’t changed. “I stand by my position that you should own Nvidia stock, not trade it,” Cramer recently told viewers.
Nvidia is currently worth $2.6 trillion, so Kendig and Cramer’s $10 trillion target implies a 285% upside for shareholders. Here’s what investors need to know.
Nvidia has a sustainable competitive advantage in AI chips
Nvidia is best known for its graphics processing units (GPUs), chips that perform complex calculations orders of magnitude faster than central processing units (CPUs). The company accounted for 98% of data center GPU shipments last year, and its GPUs powered more than 80% of AI processors, according to analysts. Nvidia is also a market leader in AI networking gear, according to Morning Star.
But where Nvidia really shines is in combining cutting-edge hardware with proprietary CUDA software. The CUDA platform includes more than 400 software libraries (building blocks) that streamline the development of GPU applications across a wide range of disciplines. Nvidia launched CUDA in 2006, and the ecosystem continues to grow. In August, for example, the company added new libraries for computing, generative AI, and physics simulations.
Morgan Stanley Analysts wrote in a recent note: “Since 2018, we’ve seen many threats to Nvidia come and go — something like a dozen startups, several attempts by commercial competitors like Intel And AMDand various custom designs. Most of these have fallen short. Competing with Nvidia, a company that spends over $10 billion a year on R&D, is a tough task.”
Blackwell GPUs Could Be the Most Important Product in Nvidia’s History
Last week, Nvidia reported stellar financial results for the second quarter of fiscal year 2025 (ending July 2024). Revenue rose 122% to $30 billion as demand for AI hardware and software drove strong revenue growth in the data center segment. Meanwhile, non-GAAP net income rose 152% to $0.68 per diluted share.
The chart below shows segment-specific revenue figures for the second quarter.
Shown above is Q2 revenue growth across Nvidia’s four primary business segments. OEM & Other revenue is excluded because it represented less than 1% of total revenue.
In August, The Information published a report claiming that Blackwell GPU shipments would be delayed due to design flaws discovered unusually late in production. Nvidia CFO Colette Kress provided context on the recent earnings call: “We have implemented a change to the Blackwell GPU mass to improve production yields. Blackwell production is scheduled to begin in the fourth quarter.”
That means Blackwell will hit the market about three months later than management originally quoted. But CEO Jensen Huang still believes the platform will be a game changer for the industry. In fact, he recently told analysts, “The Blackwell architecture platform will probably be the most successful product in our history.”
Nvidia stock is trading at a fair valuation
Wall Street analysts expect Nvidia’s adjusted earnings to grow 49% annually through fiscal 2026 (ending January 2026). That consensus estimate makes the company’s current valuation of 48 times adjusted earnings seem reasonable.
As for the $10 trillion goal that Beth Kendig and Jim Cramer have set, I think Nvidia could hit the milestone in 2030. For example, if we assume the price-earnings ratio drops to 25 by the end of the decade, Nvidia would reach a $10 trillion valuation if earnings grew 36% annually.
That’s more than achievable. According to Grand View Research, spending on AI hardware, software and services is expected to grow 36% annually through 2030. But investors shouldn’t take that outcome for granted. A lot can go wrong in the next six and a half years.
Should You Invest $1,000 in Nvidia Now?
Before you buy Nvidia stock, here are some things to consider:
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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
1 Artificial Intelligence (AI) Stock You Need to Buy Before Its Price Surges 285%, According to Some Wall Street Experts was originally published by The Motley Fool
