The past five years have been big for Nvidia (NVDA 3.17%). The company saw revenue explode higher, advancing more than 600% over that time period, and the stock price followed as it increased a mind-boggling 1,200%. The reason for this performance is clear: Nvidia got in early on a market that is worth billions of dollars today and may reach the trillion-dollar mark by the end of this decade.
I'm talking about the artificial intelligence (AI) market. Nvidia designed its graphics processing units (GPUs) to suit the needs of AI -- and those high-performance chips so far have been unbeatable. Meanwhile, Nvidia expanded its offerings into other products and services for AI customers to truly accompany them along the entire AI path.
So now the question investors might ask, especially at a time when everyone is talking about the scale-up of AI infrastructure, is: Where will Nvidia be in five years? Let's find out.
Image source: Nvidia.
Fueling major AI tasks
Nvidia spent the past five years building up its AI strengths and its reputation as the place to go for the fastest GPUs around -- speed and general efficiency are important to customers because the faster they complete their AI projects, the sooner they can benefit from them. This has prompted customers, especially big tech players, to pile into Nvidia GPUs. These chips fuel major AI tasks, like the training and inferencing of models, so they are a critical part of any AI data center.
And this brings me to the subject of the infrastructure scale-up -- we're seeing this phase now and it should last into the next few years. In fact, Nvidia chief Jensen Huang expects AI infrastructure spending to reach as much as $4 trillion by the end of the decade. And since data centers need GPUs, Nvidia is likely to win big as companies from Alphabet to Meta Platforms pour more investment into the AI buildout. (Both of these tech giants recently said they were increasing capital spending this year to support their AI investments.)
NASDAQ: NVDA
Key Data Points
A commitment to innovation
While Nvidia is serving this demand, it will also do something that's key to maintaining its dominance, and that's releasing GPU updates, from the Vera Rubin system set for release next year to others to follow on an annual basis. This commitment to innovation should make it difficult for rivals to get in the way -- and customers' interest in accessing the most powerful chips available should keep them coming back to Nvidia.
At the same time, other significant projects might unfold. For example, Nvidia's work in robotics may progress, opening the door to what Huang has called a trillion-dollar market.
One of the first significant uses for Nvidia chips in robotics will be in the area of self-driving cars, according to Huang -- Nvidia's chips would train the software and power features in the car. Nvidia is steadily progressing here as it's signed on automakers from Mercedes-Benz to Toyota for its self-driving platforms.
A $10 trillion market cap
All of this could power Nvidia's earnings and share price higher -- even driving this company to $10 trillion in market value as I recently predicted. As I mentioned in that article, Nvidia would have to generate about $380 billion in annual sales in 2030 to keep its price-to-sales ratio in line with today's level.
This is something Nvidia clearly could accomplish, even if growth slows from the pace we've seen in recent quarters. In the latest quarter, revenue climbed 56%, and gains have been in the double- or triple-digits over the past few years. Considering the strong demand right now for Nvidia's GPUs as well as forecasts for AI infrastructure spending, it's unlikely that any slowdown in growth would be extreme.
So, with all of this in mind, where will Nvidia be in five years? I expect the company will continue to see double-digit growth in revenue thanks to its GPUs and related products, and Nvidia may even see significant progress in new growth areas like robotics. All of this could maintain its position as the world's biggest company and push it to a $10 trillion market cap five years from now.
