Artificial intelligence (AI) has become a hot investment area, and investors are betting on tomorrow's winners. This has driven shares of technology companies active in this space to double- and triple-digit gains -- and helped the S&P 500 and Nasdaq-100 recently reach record highs.
Why so much excitement? AI has the potential to save companies time and money -- and lead to major progress in game-changing areas like personalized medicine or autonomous vehicle technology. In fact, some analysts predict the AI market will surpass $1 trillion by the end of this decade. That means investors who bet on tomorrow's AI leaders today could win big.
Some early investors in AI stocks already have benefited, and that brings me to the subject of one of today's most exciting AI players: Nvidia (NVDA 6.18%). Investors who put $100,000 into that stock just three years ago have seen the value of that investment soar to more than $600,000. But the question now is whether this exciting AI stock could do this again -- or are Nvidia's biggest gains a thing of the past?
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Nvidia's 500% gain
Nvidia clearly has been a profitable investment recently, gaining more than 500% over the past three years. Seeing the momentum in everything related to AI, this is no surprise. After all, Nvidia is the leading maker of chips that power one of the most important actions in the field of AI, and that's "deep learning." This involves the pouring of enormous amounts of data into AI models so that they then can solve complex problems and carry out a broad range of tasks.
To drive this learning process, speed is crucial, and that's where Nvidia's chips come in. The company's graphics processing units (GPUs) are the fastest on the market by far, making them a top choice of the world's major technology companies that are building AI models -- for example, Meta Platforms recently said it aims to have 350,000 of Nvidia's H100 GPUs on board by the end of the year. And server giant Super Micro Computer works hand in hand with Nvidia, following its product development so that Supermicro can adapt its own products to include Nvidia's latest releases.
These are just a couple of examples, but they illustrate the strength of Nvidia in the AI market.
Importantly, Nvidia doesn't only design chips -- but it also offers a broad range of products and services, such as its software platform, which supports its clients in the development and deployment of AI systems. All this should help Nvidia keep its leading spot in the AI market and power more growth down the road.
Now, let's get back to our question: Could Nvidia stock once again advance in the triple digits over the coming years and drive major gains for investors? A triple-digit gain would bring Nvidia to about $2,000 a share from today's level of a little more than $800, which would bring the company's market value to $5 trillion. That's up from a market cap of about $2 trillion today and would surpass today's biggest company, Microsoft, which is valued at $3 trillion.
Triple-digit earnings growth
All of this is possible from a mathematical angle -- if Nvidia keeps up the tremendous pace of earnings growth we've seen in recent quarters. In the fourth quarter, revenue and net income advanced in the triple digits, thanks to AI-related demand.
Nvidia chief executive officer Jensen Huang says the industry transition to accelerated computing from general computing and the use of generative AI are making "conditions excellent for continued growth."
Growth drivers lie ahead, too: Nvidia is in the early days of its revenue growth story in the software business, and the company's increasing research and development spending could cement leadership in GPUs and beyond.
Of course, placing a $100,000 bet on any one company is highly risky, so if you have this amount to invest, you're better off spreading it across a selection of quality companies. This will limit your losses if one particular stock doesn't perform as well as you'd hoped.
But within your investing budget, whether it's small or large, Nvidia still makes a great investment today -- thanks to its market leadership, broad range of products and services, and investment in R&D, this tech giant could keep on growing, and even deliver another triple-digit gain down the road.
