Nvidia's (NVDA 0.80%) stock has been a huge winner over the past three years, as the company is the biggest early beneficiary of the artificial intelligence (AI) infrastructure buildout. The question, though, is where will the stock go next after such a huge run?
Let's look at how Nvidia gained its dominant position and where the stock may be headed in the next three years.
NASDAQ: NVDA
Key Data Points
Some smart moves and a little luck
Nvidia's early ties were to the video gaming industry, where it developed graphic processing units (GPUs) to accelerate graphics rendering in video games. The company became a leader in the space, and in 2006, it created a free software platform called CUDA to allow programmers to program its chips directly. With Nvidia the leader in this big but fairly niche space, developers were generally taught to program GPUs using Nvidia's CUDA software.
Eventually, GPUs started to spread to other applications, given their strong computing power. They began being used in the auto space as well as with cryptocurrency mining. Nvidia has been talking about AI in the data center space for a while, and its acquisition of networking company Mellanox in 2020 pushed it further into the data center space.
However, last year, ChatGPT helped bring AI to the mainstream, and Microsoft's increased investment in and partnership with its creator OpenAI subsequently set off an AI infrastructure arms race. GPUs became the backbone of the AI infrastructure needed to train large language models (LLMs) and run AI inference, and Nvidia just so happened to be the leading GPU company in the world.
Image source: Getty Images.
Moving forward
While Nvidia may not have predicted the sudden explosion of demand for GPUs related to AI, it had positioned itself as an AI leader in the data space well ahead of time. It had also created a wide moat for GPUs with its software platform many years ago. Since developers have been trained using its software, it takes time and becomes expensive to retrain developers to use software from competitors.
This, together with continued innovation, should help Nvidia hang on to its dominance in the GPU space. The company is accelerating its development cycle, taking it down from two years to now only one year. While there has been a delay, the company's new Blackwell architecture should begin shipments at the end of the calendar year or early 2025. Meanwhile, it has already announced its new Rubin architecture, which it is looking to launch in 2026.
This increased innovation cycle should both help Nvidia keep its technological lead and maintain pricing power.
From there, it comes mostly about demand and how many chips Nvidia can supply. On the demand side, it still appears the AI infrastructure buildout is in the early innings, with cloud computing and other big tech companies all ramping up AI-related capital expenditures (capex).
Both Meta Platforms and Alphabet have acknowledged there being more risk in under-investing in AI capacity than over-investing, while Meta also noted that its Llama 4 LLM will likely need 10 times the computing power as Llama 3. Meanwhile, the computing power needed for more advanced LLMs should only grow. This means more GPUs will be needed in the future.
Where the stock can head in 3 years
Nvidia's revenue growth will slow from the triple-digit pace at which it has been growing recently. However, given the heavy demand for Nvidia's chips and the spending commentary from large customers, it seems plausible the company could grow its revenue by 30% to 50% a year over the next three years. With analysts predicting fiscal year 2025 (ending in January) revenue to be around $121 billion, that would equal fiscal year 2028 revenue (basically 2027 as it ends in January 2028) of $330 billion, projecting revenue growth of 50% next year, 40% the year after, and 30% in fiscal year 2028.
If the company's adjusted operating expenses increased an average of 13% quarter over quarter through fiscal year 2028 (similar to last quarter's sequential growth) with a 20% tax rate on its operating income, Nvidia would generate about $166 billion of annual earnings, or $6.76 per share, by fiscal year 2028.
| (in billions except EPS) | FY2025 | FY2026 | FY2027 | FY2028 |
|---|---|---|---|---|
| Revenue | $121 | $182 | $254 | $330 |
| Revenue growth | 95% | 50% | 40% | 30% |
| Gross profit (79% gross margins) | $96 | $143 | $201 | $261 |
| Adjusted operating expense | $12 | $20 | $32 | $53 |
| Operating income | $84 | $123 | $169 | $208 |
| Net income | $67 | $99 | $135 | $166 |
| Adjusted EPS | $2.72 | $4.01 | $5.49 | $6.76 |
The data above is based on the author's hypothetical projections, which are above analyst consensus estimates for FY2026 through FY2028. Actual future results may vary.
With slower growth, Nvidia's forward price-to-earnings ratio (P/E) would come down. However, if it were to grow revenue 30% in fiscal year 2028, a multiple of 30 to 40 times on the stock in 2027 would seem reasonable. That would value the stock between $200 and $270 per share in three years. As such, there is a good possibility that Nvidia's stock could once again double from where it is now in three years.
