Nvidia (NVDA 2.54%) is the world's most valuable company today, sporting a monster market cap of $4.4 trillion. It made an incredible journey to get to this point. Shares are up an unbelievable 31,310% in the past decade (as of Sept. 23), which would have turned a tiny $3,200 starting investment into a cool $1 million today.
If a business sees its share price rise that much in such a short time, it's clearly doing something right. And it's safe to say that Nvidia has been thriving as the artificial intelligence (AI) revolution ushers in a major technological shift.
This booming AI stock has easily made many millionaires in the past. But if you're a buyer today, can Nvidia eventually get you into the seven-figure club?
Image source: Nvidia.
Easy to be bullish
Nvidia experienced tremendous success because there is so much demand for its graphics processing units (GPUs), particularly those that power AI training and inference in data centers. This segment alone represents 88% of the company's sales, with revenue soaring 56% year over year in the fiscal 2025 second quarter (ended July 27).
Besides succeeding in the hardware space, Nvidia's CUDA software platform allows developers to build high-performance applications using the company's GPUs. This powerful ecosystem further widens Nvidia's economic moat. And because the business is so profitable, with a Q2 operating margin of 61%, it has the financial resources to continue investing in research and development to introduce more capable chips to the market.
As the dominant player at the infrastructure layer of the AI boom, Nvidia is a clear pick-and-shovel investment opportunity. The bulls are viewing the current moment as an AI gold rush. And selling the necessary tools and services to those building with AI has been a wildly successful strategy.
The company put up monster historical growth, and Wall Street thinks the momentum will continue. Between fiscal 2025 and fiscal 2028, the consensus analyst view is that revenue will increase at a compound annual rate of 35%, with earnings per share increasing at a similar clip. It's extremely difficult not to be optimistic with that kind of outlook.
Figuring out what can go wrong
Nvidia's financial performance is impressive, and the stock soared as a result. But there are some potential risks.
Spending on AI has ballooned, with hundreds of billions of dollars being spent this year alone. That figure is set to rise in the years ahead. But what if there's an economic slowdown? In this bearish scenario, it wouldn't be surprising at all to see companies pause their AI plans until executives regain confidence in the economy. This could pressure Nvidia's sales.
There are also shifting trade policies to consider. AI may have huge geopolitical ramifications, and countries are racing to become leaders of this new technology. Trade tensions continue between the U.S. and China, with Nvidia being in the middle of ongoing trade discussions. For instance, the U.S. government was set to take 15% of Nvidia's revenue from China. But now, China has banned Nvidia chips. All this adds an element of uncertainty.
Have the right perspective
In my view, it's easy to be optimistic about Nvidia. That perspective is bolstered by a compelling valuation, with shares trading at a forward price-to-earnings ratio of 41.
Buying Nvidia stock right now looks like a smart decision. However, don't expect past returns to repeat. The business probably won't make you a millionaire, but it has the chance to boost your portfolio's returns in the next five or 10 years.
