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Nvidia is the hottest stock split on Wall Street. The artificial intelligence (AI) business could be worth $10 trillion by 2030

The S&P500 has hit 31 all-time highs and is up 15% this year. Much of that upward momentum can be traced to semiconductor companies Nvidia (NASDAQ: NVDA)the most popular stock split on Wall Street due to its dominance in artificial intelligence (AI) infrastructure and its growing reach in the AI ​​economy.

Nvidia shares are up 155% year to date, so the chipmaker alone has contributed nearly a third of the S&P 500’s gains. S&P Global analyst Howard Silverblatt, hasn’t since IBM in the 1980s, a single company had such an influence on the index.

Nvidia’s market capitalization is $3.1 trillion, making it the third largest company in the world. But I/O Fund analyst Beth Kendig thinks the chipmaker will be worth $10 trillion by 2030. That forecast implies upside potential of about 220%, and it carries weight because Kendig has an impressive track record when it comes to Nvidia.

In 2021, she predicted Nvidia would surpass Apple‘s market capitalization within five years through AI monetization. It only lasted three years. Nvidia even briefly became the most valuable company in the world last week.

Could the chipmaker be worth $10 trillion by 2030?

The bull case behind Nvidia’s $10 trillion target

Nvidia graphics processing units (GPUs) are the standard-bearer of data center accelerators, especially when it comes to AI. Analysts at Forrester research recently wrote: “Nvidia is setting the pace for AI infrastructure worldwide. Without Nvidia GPUs, modern AI would not be possible.” The company has a market share of over 90% in data center GPUs and over 80% in AI chips.

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However, Nvidia is truly formidable because it offers a full-stack accelerated computing solution that includes hardware, software and services. Technology analyst Beth Kendig highlighted that advantage in Forbes. “We believe Nvidia will reach a $10 trillion market cap by 2030, or sooner, through a rapid product roadmap. [its] impenetrable moat of the CUDA software platform, and because it is an AI systems company that provides components far beyond GPUs, including networking and software.”

To expand on this, CUDA is a programming language that allows developers to write applications for GPUs. The CUDA ecosystem includes hundreds of software libraries and frameworks (application building blocks) that support workflows in data analytics, AI, and scientific computing. CUDA runs only on Nvidia GPUs and supports the company’s other subscription software and cloud services.

For example, Nvidia AI Enterprise is a software platform that simplifies the development of AI applications for various use cases, such as recommendation systems, conversational assistants, cybersecurity threat detection, and autonomous machines. Similarly, DGX Cloud brings together supercomputing infrastructure, AI software and pre-trained models into a complete solution for developers.

That full-stack product strategy offers Nvidia a sustainable economic moat. The GPUs consistently outperform competitor products on industry-standard benchmarks, the MLPerfs, and the CUDA platform is the most comprehensive ecosystem of developer support software. Put another way: Nvidia chips are superior in performance and convenience.

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Additionally, in recent years, Nvidia has expanded its hardware portfolio to include central processing units (CPUs) and networking platforms built specifically for AI. Argus analyst Jim Kelleher recently noted, “In our view, Nvidia stands out because it participates in so many parts of the dynamic AI economy.”

In short, Nvidia has positioned itself as a one-stop shop for AI, and that bodes well for shareholders. Grand View Research estimates that AI sales of hardware, software and services will increase 37% annually through 2030. Nvidia is well positioned to ride that wave to a higher valuation, perhaps even $10 trillion.

Nvidia shares are trading at an acceptable valuation

Wall Street analysts expect Nvidia to grow earnings per share 33% to $4.95 by fiscal 2028 (end of January 2029). When that consensus estimate is broken down into the current price-to-earnings ratio of 74 times earnings, the result is an acceptable price-to-earnings-growth ratio of 2.2. That is well below the three-year average of 3.2.

Looking ahead, if Nvidia maintains 33% annual earnings growth through fiscal 2030 (end of January 2031), its market cap will exceed $10 trillion when the stock trades at 46 times earnings. That scenario is plausible, but the bar is very high. To achieve that outcome, Nvidia would need to not only maintain its leadership in AI processors, but also continue to expand its influence in other areas of the AI ​​economy.

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But even if Nvidia fails to reach that milestone within the deadline, the stock could still beat the market over the next three to five years. Patient, risk-tolerant investors should consider buying a very small position today.

Should You Invest $1,000 in Nvidia Now?

Consider the following before buying shares in Nvidia:

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Trevor Jennevine has positions at Nvidia. The Motley Fool holds positions in and recommends Apple, Nvidia and S&P Global. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.

Nvidia is the most popular stock split on Wall Street. The artificial intelligence (AI) company could be worth $10 trillion by 2030, originally published by The Motley Fool

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