The past three months haven't been great for Nvidia (NVDA +1.13%) investors as shares of the graphics card specialist have dropped nearly 20% during this period, dropping at a much faster pace when compared to the S&P 500 index's drop of 8%.
Nvidia's tepid performance can be attributed to factors outside the company's control, such as export controls on its chips and the potential impact of the tariffs being imposed by the Trump administration. But what's worth noting here is that the chipmaker's financial performance remains robust amid all the noise.
NASDAQ: NVDA
Key Data Points
This was evident from the company's latest quarterly report for the fourth quarter of fiscal 2025 (which ended on January 26). Nvidia's results were better than expected, and its guidance suggests that it is on track to sustain its healthy growth rate in the new fiscal year. More importantly, there are new catalysts coming into play for Nvidia that could pave the way for long-term growth at the company.
Let's take a closer look at those catalysts and check why they could help this technology giant beat the market in the long run.
New growth opportunities can help Nvidia sustain its impressive growth
Nvidia's data center business has been in the limelight for the past couple of years, driven by the outstanding demand for the company's graphics processing units (GPUs) for training artificial intelligence (AI) models. However, investors shouldn't forget that Nvidia came into prominence because of the personal computer (PC) market.
The company's GPUs have been used in PCs and workstations for a very long time to handle intensive workloads such as gaming and content creation. In fact, gaming was Nvidia's biggest business just five years ago, accounting for nearly half of its top line. However, Nvidia saw the opportunity for accelerated computing in data centers and was quick to roll out chips to tackle AI workloads five years ago, leaving competitors such as Advanced Micro Devices and Intel in the dust.
Its A100 processor, which was launched in 2020, gained immense popularity as it was used to train OpenAI's ChatGPT. Nvidia kept pushing the envelope in the data center GPU market since then, making its chips more powerful to quench the need for more computing power to train AI models.
Tech giants spent billions of dollars on Nvidia's AI GPUs to train large language models (LLMs) in a bid to stay ahead in the AI race. Now, the company is targeting the other aspect of the AI market: inferencing. AI inference is the next stage of training in which the AI model is put to work. According to one estimate, the market for chips used for AI inference could see an annual growth rate of 35% through 2031.
Nvidia is already tapping this massive opportunity. That's not surprising, as Nvidia points out that its latest Blackwell AI chips are designed with AI inference in mind. Nvidia CFO Colette Kress remarked on the latest earnings conference call that many of the early deployments of its Blackwell systems are "earmarked for inference, a first for a new architecture." She also added that the company has achieved a 200x reduction in AI inference costs in just two years.
So, it won't be surprising to see Nvidia's AI inference revenue getting bigger in the long run, allowing the company to maintain its terrific share of the AI chip market, which is expected to generate over $1.1 trillion in revenue by 2032. Meanwhile, Nvidia management's comments on the latest earnings call suggest that its automotive business is set to step on the gas.
Nvidia generated $1.7 billion in automotive revenue in fiscal 2025, an increase of just 5% from the prior year. However, the company is expecting its automotive revenue to nearly triple this year to $5 billion. The company points out that the terrific growth in its automotive business this year will be driven by the growing compute demand in vehicles to support autonomous functions.
More importantly, Nvidia is building a solid ecosystem of customers that includes the likes of Toyota, Hyundai, Uber, BYD, Volvo, Mercedes-Benz, and others, that are developing automotive solutions using its hardware and software offerings. Even better, Nvidia's automotive business has a lot of room for growth in the long run, as the company estimates a total addressable market (TAM) worth $300 billion.
In all, Nvidia's total addressable opportunity across different segments stands at $1.7 trillion. The company generated just under $131 billion in revenue in the previous fiscal year. So, the size of its addressable market suggests that it still has a lot of room to grow its revenue and earnings in the long run, which is why it won't be surprising to see the stock soar once again going forward.
Nvidia's earnings growth potential and valuation point toward a solid jump in the stock price
Nvidia finished fiscal 2025 with non-GAAP (adjusted) earnings of $2.99 per share, up by an impressive 130% from the previous year. Looking ahead, analysts are expecting Nvidia to maintain its robust earnings growth rate.
NVDA EPS Estimates for Current Fiscal Year data by YCharts
Consensus estimates are projecting Nvidia's earnings to hit $6.42 per share in fiscal 2028. Assuming that the stock trades at 30 times earnings at that time, in line with the tech-laden Nasdaq-100 index's earnings multiple (using the index as a proxy for tech stocks), its stock price could hit $193 in three years. That would be a jump of 75% from current levels, suggesting that this tech stock has the potential to regain its mojo and deliver market-beating returns over the next three years.
Given that Nvidia is trading at just 25 times forward earnings right now, the time seems right for investors to add this semiconductor bellwether to their portfolios, as it still has enough fuel in the tank to keep growing at healthy rates for a long time and deliver above-average returns to investors as a result.
