The last five years have been amazing for Nvidia (NASDAQ: NVDA) shareholders, as the company’s market cap has increased by a phenomenal 2,900%. An investment of just $100 in the stock half a decade ago is now worth just over $3,000.
The 30x rise in Nvidia stock over the past five years can be justified by the multiple catalysts that have fueled the company’s growth. Exceptionally robust demand for its graphics processing units (GPUs) deployed in personal computers (PCs), data centers, and automotive applications has led to a massive increase in the company’s revenue and profits during this period.
Now, it seems far-fetched to expect Nvidia stock to rise another 30x over the next five years, considering the company now has a market cap of just over $3 trillion and is one of the three largest companies in the world. For comparison, the entire global economy was worth an estimated $105 trillion in 2023. However, given the coming catalysts, there’s a good chance that Nvidia stock will continue to rise over the next five years, even if those gains may not be as astronomical as those of the past five years.
AI fuels Nvidia’s growth
For Nvidia’s fiscal year 2024, which ended Jan. 28, revenue came in at $60.9 billion, up from $11.7 billion in fiscal 2019. That means Nvidia’s revenue has grown fivefold over the past five years. Analysts predict something similar could happen thanks to the massive growth engine that is the artificial intelligence (AI) market.
Mizuho Securities expects Nvidia’s data center revenue alone to rise to $280 billion in 2027, which would coincide with the bulk of Nvidia’s 2028 fiscal year. That would be a huge increase from the $47.5 billion in data center revenue the company reported in fiscal 2024 (which ended in January of this year and coincided with 11 months of 2023) and the $89 billion in revenue it expects to generate from this market in the current 2025 fiscal year.
One reason that prediction could be correct is that the AI chip market is expected to reach a staggering $400 billion in annual revenue by 2027 (which would be fiscal 2028 for Nvidia), according to industry peer Nvidia. AMD. Mizuho’s Nvidia revenue estimate for calendar year 2027 (fiscal year 2028 for Nvidia) suggests it would control a 70% share of the AI chip market by then. While that would be lower than the 90% or more share the company currently has in that market, it would still be able to achieve massive revenue growth given the potential size of the AI chip market after four fiscal years.
It’s important to note here that even if the AI chip market takes longer than predicted to reach $400 billion in revenue, and even if Nvidia’s share shrinks to 50%, data center revenue alone could still grow fourfold in the coming years.
These catalysts could give Nvidia an extra boost
Nvidia has other potential growth engines that could help expand its revenue.
For example, the market for gaming GPUs installed in PCs is likely to benefit from an increase in spending on gaming hardware. Statista predicts that the gaming hardware market will generate $161 billion in revenue in 2024, and predicts that it could grow to $241 billion by 2029. Nvidia should be a big beneficiary of this growth, as it held an impressive 88% of the PC graphics card market in the first quarter of 2024.
Meanwhile, growing demand for digital twin systems helped Nvidia’s professional visualization business grow revenue 45% year-over-year to $427 million in the first quarter of fiscal 2025.
Nvidia is scratching the surface of a potentially massive opportunity in the digital twin market. According to a Mordor Intelligence forecast, that space could generate $126 billion in revenue by 2029. From this year’s forecast of $26 billion, that would be a compound annual growth rate of 37%. More importantly, Nvidia is building a solid customer base for its digital twin offerings. This was evident in comments from CFO Colette Kress during the company’s latest earnings call:
Companies are using Omniverse to digitize their workflows. Omniverse-powered digital twins enable Wistron, one of our manufacturing partners, to reduce end-to-end production cycle times by 50% and defect rates by 40%. And BYD, the world’s largest electric vehicle manufacturer, uses Omniverse for virtual factory planning and retail configuration.
Kress added that industrial software developers such as Cadence, AnswersDassault, and Siemens are some of the big names embracing their digital twin software. As such, there’s a good chance that Nvidia’s revenue growth over the next five years will match the growth it’s experienced over the past five years. In fact, analysts predict that revenue will triple in just three fiscal years (from $60.9 billion in fiscal 2024).
Assuming Nvidia posts revenue of $184.5 billion in fiscal 2027, its revenue would have grown at a compound annual rate of 45%. If the semiconductor giant’s growth slows to, say, 25% per year over the next two years, revenue could hit $288 billion after five years. That would be nearly 5x revenue growth relative to fiscal 2024, and would be nearly equal to the growth the company has posted over the past five years.
Of course, there’s a good chance that the company can grow faster thanks to the catalysts discussed above. Therefore, investors who haven’t bought this growth stock yet may still want to consider adding Nvidia to their portfolio. The tech giant seems poised for much more upside over the next five years.
Should You Invest $1,000 in Nvidia Now?
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Cadence Design Systems and Nvidia. The Motley Fool recommends Ansys. The Motley Fool has a disclosure policy.
Where Will Nvidia Stock Be in 5 Years? was originally published by The Motley Fool
