Nvidia (NVDA +5.93%) has been a huge winner on the stock market in the past decade, turning an investment of just $100 into nearly $25,000 as of this writing on account of the outstanding revenue and earnings growth that it has delivered during this period.
The graphics card specialist has benefited from multiple growth trends during this period, such as the growth of the video gaming market, the advent of connected cars and autonomous driving technology, high-performance computing, and artificial intelligence (AI). However, Nvidia's remarkable surge in the past 10 years has made it the second-most valuable company in the world with a market cap of $3.4 trillion.
NASDAQ: NVDA
Key Data Points
Investors, therefore, may be wondering if Nvidia has the ability to deliver substantial gains over the next decade as well, considering where it is now. Let's take a closer look at Nvidia's potential catalysts for the next decade and try to find out if it is worth buying the stock now in anticipation of more upside in the long run.
Nvidia still has a lot of room for growth over the next decade
Expecting Nvidia to replicate the gains it has clocked in the past decade over the next 10 years as well looks outlandish. A 250x jump in the stock price in the next decade would take its market cap to a whopping $850 trillion, and that isn't logical, as the global economy is expected to hit an estimated $155 trillion in 2035.
However, Nvidia can still deliver respectable gains in the coming decade thanks to the sizable end markets the company is likely to benefit from. For instance, the shift toward accelerated computing in data centers in order to speed up tasks and reduce power consumption and operating costs is expected to open a $1 trillion revenue opportunity for Nvidia, according to CEO Jensen Huang.
That level of investment may look like a lot initially, but it does seem possible considering that $2.6 trillion was spent on constructing data centers between 2017 and 2024. Those data centers are now in need of upgrades to tackle intensive workloads such as AI. As a result, data center workloads are likely to be shifted from central processing units (CPUs) to graphics processing units (GPUs) to extend the life of their server infrastructure.
That's because the parallel computing power of GPUs will allow them to tackle intensive workloads while offloading less intensive tasks to CPUs. This is likely to reduce the stress on the system as GPUs are designed to accomplish bigger calculations in a shorter time span, leading to reduced energy consumption and higher efficiency. Moreover, the reduced stress on CPUs means that they will experience lower wear and tear, thereby extending the life and computational power of data centers at the same time.
This massive opportunity in accelerated computing is going to be a huge tailwind for Nvidia's data center business, which has generated $98 billion in revenue in the past four quarters. Given that Nvidia controls an estimated 85% of the data center GPU market, it is in a solid position to make the most of this potentially huge market. Even if Nvidia loses ground to competitors and controls half of the data center GPU market after a decade, its data center revenue could jump by 5x based on the company's $1 trillion estimate.
But then, Nvidia's competitors are nowhere near matching its technological advantage and control over the chip fabrication supply chain. That's why Nvidia's data center revenue could record stunning growth over the next decade. But this isn't the only big opportunity that the semiconductor giant could take advantage of through 2035.
The cloud gaming market, for example, presents another huge growth opportunity for Nvidia. Roots Analysis predicts that the cloud gaming market, which was worth less than $5 billion in 2024, could generate a whopping $237 billion after a decade. That won't be surprising as cloud gaming allows gamers to play the latest games without having to invest in expensive hardware, and all they need is a fast internet connection.
Nvidia has already built a solid position for itself in the cloud gaming space, indicating that this could be yet another huge multibillion-dollar opportunity that could help the company sustain healthy levels of growth over the next decade. Throw in the possibility that Nvidia's overall addressable revenue opportunity is close to $2 trillion, and there is a strong possibility that its top line could jump significantly higher in the next 10 years from the estimated $129 billion in the latest fiscal year.
An attractive valuation makes Nvidia worth buying and holding
Nvidia is trading at 32 times forward earnings, which is lower than its five-year average forward earnings multiple of 40. Buying Nvidia at this level and holding it for the next decade could be a smart move considering the company's massive addressable revenue opportunity that could send its earnings higher in the long run.
Additionally, Nvidia's price/earnings-to-growth ratio (PEG ratio) of 1, based on the company's expected earnings growth for the next five years as per Yahoo! Finance, suggests that it is fairly valued right now with respect to the growth that it is expected to deliver. So, even though Nvidia's rise in the coming decade may not be as big as what we have seen in the past, this tech stock could still make for a good addition to a diversified portfolio considering its lucrative catalysts.
