Only 10 years ago, Nvidia's (NVDA +0.29%) market cap stood at $11.5 billion. Today, the company is a technology giant worth $3.5 trillion. The stock has been a 304-bagger in a decade with much of the growth coming over the last two years.
How much bigger can Nvidia grow? One analyst thinks it will be a $10 trillion stock within five years. Is that prediction absurdly optimistic? No. Here's exactly how it could happen.
NASDAQ: NVDA
Key Data Points
Blackwell "fireworks"
I/O Fund's Beth Kindig isn't a Wall Street analyst. Her company, which specializes in technology research and manages a real-time portfolio, is based in Boulder, Colorado, instead of New York City. Kindig has been one of the biggest Nvidia bulls around. In 2021, she predicted Nvidia would be bigger than Apple within five years. That prediction came true (albeit temporarily) last month.
Yahoo! Finance's Morning Brief program interviewed Kindig in August 2024 after Nvidia reported its second-quarter results. Despite posting strong numbers, Nvidia's share price fell after its Q2 update. But Kindig argued, "Early next year will be fireworks again for Nvidia." She said the company will be on track for a $10 trillion market cap once its new Blackwell GPUs begin shipping.
The Blackwell "fireworks" Kindig expects are enormously important in any scenario where Nvidia's valuation reaches $10 trillion by 2029. Although the chipmaker hasn't recorded any revenue from the new GPUs yet, expectations are sky-high.
Nvidia CEO Jensen Huang has fanned the flames of anticipation. He stated earlier this year, "The Blackwell architecture platform will likely be the most successful product in our history and even for the entire computer history."
Kindig wrote in a blog a few days ago that Nvidia could ride Blackwell's success to a 70% gain in 2025. If she's right, that would give the company a market cap of roughly $6 trillion.
Rinse and repeat
Granted, $6 trillion is still far from $10 trillion. However, Blackwell is just the first driver of Nvidia's future growth. The company basically plans to do what the shampoo bottle instructions say: rinse and repeat.
In Nvidia's 2024 Q1 earnings call, Huang announced another chip was coming after Blackwell. The industry (and investors) won't have to wait long for it. Huang said Nvidia is "on a one-year rhythm" with annual new product releases.
Advances in artificial intelligence (AI) models are being made so rapidly that increasingly more powerful chips are needed. Huang noted in Nvidia's Q3 call last month, "[W]e're at the beginning of a new generation of foundation models that are able to do reasoning and able to do long thinking." This could translate to increasing demand for his company's GPUs.
But there's also another tailwind for Nvidia. Accelerated computing is replacing general-purpose computing in data centers. Huang said in August, "$1 trillion worth of data centers in a few years will be all accelerated computing." Again, this trend should drive demand for Nvidia's chips.
Getting to $10 trillion
Let's assume Nvidia reaches a $6 trillion market cap by late 2025 based on the skyrocketing demand for Blackwell GPUs. The stock would need to increase by a compounded annual growth rate of roughly 13.6% over the next four years to top $10 trillion. Considering we're still in the early stages of AI and accelerated computing, that level of growth seems quite attainable.
What could get in the way of Nvidia becoming a $10 trillion stock within five years? For one thing, a major economic downturn could wipe out much of the company's market cap. Also, several of Nvidia's major customers are using alternative AI chips with some even developing their own chips. They could turn increasingly to lower-cost options to prevent the erosion of their profit margins.
But is the idea that Nvidia could be worth $10 trillion by the end of the decade unrealistic? I don't think so.
