The artificial intelligence (AI) boom that has occurred over the past few years has elevated chip designer Nvidia (NVDA -1.42%) from a good investment into an amazing one, as its share price spiked over 900%.
With gains of that magnitude, it's logical to wonder whether Nvidia stock can keep the momentum going and set investors up for life, or if the stock has run its course. Here's why Nvidia is a hands-down fantastic stock to own, but why it's also unlikely to set you up for life at this point.
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Nvidia still has room to run
Many technology companies are chasing after AI glory right now, but Nvidia is one of the only companies that can benefit no matter who wins the AI race. Nvidia's processors lead the pack in AI data center market share -- with up to 95% by some estimates. This means that as large tech companies invest hundreds of billions of dollars into building AI data centers, Nvidia's processors are almost always chosen to go in them.
That's resulted in mammoth-sized revenue gains for the company, including a 126% and 114% increase over the past two years. And there could be more growth on the way. Tech giants aren't finished investing in their AI infrastructure, and an estimated $2 trillion could be spent on AI data centers over the next four years.
Nvidia is also expanding into related markets, including enterprise AI software, and could benefit from the burgeoning autonomous vehicle market, both of which could help extend its growth runway. Given the continued and large investments in AI by major tech companies and Nvidia's lead in providing semiconductors to them all, there isn't currently much to worry about concerning Nvidia's core business.
But duplicating Nvidia's recent gains will be nearly impossible
While Nvidia certainly has more room to continue selling its processors to tech companies as they build their AI infrastructure, at some point, this initial surge in spending will subside. We're already a few years into companies creating chatbots, AI agents, and other cloud-based AI tools. Like any new major tech trend, there's typically a first wave of big investments before an eventual tapering off.
While no one knows when that will happen or to what extent, it likely means that Nvidia's astronomical gains over the past few years won't be replicated. The likelihood that Nvidia could continue doubling its sales for several more consecutive years at this point is unrealistic, given that its fiscal 2025 revenue was nearly $131 billion.
For example, analysts' consensus estimate for Nvidia's sales growth for 2026 is 54% to $250 billion and 25% growth in 2027. That's still a very impressive revenue increase, but it's not anywhere near the recent growth Nvidia has experienced.
It's also important to point out that Nvidia's rapid stock-price growth over the past few years means that its shares are likely priced for perfection. A sales or earnings miss at this point, even if it's not technically a bad quarter, could cause the stock to fall based on sky-high expectations.
Nvidia probably won't set you up for life, but don't ignore it
While Nvidia isn't likely to set you up for life if you buy the stock now, ignoring this AI leader would be a mistake. The company is still in a leading position in AI processors at a time when AI is still in the early innings.
That's why buying the stock could still be a wise move. Just don't expect another 900% share-price gain over the next three years.
