Nvidia (NVDA +1.01%) shares have had an excellent run in 2025, rising just shy of 30%. However, the stock has pulled back in recent weeks due to concerns of a potential artificial intelligence (AI) bubble. This weakness could be a great buying opportunity, as the AI buildout still looks like it's going full steam ahead, despite what the market wants.
To estimate what kind of returns we can get by buying Nvidia's stock now, we need to come up with a price target for Nvidia's stock for the end of 2026. Let's do some analysis on its growth and valuation. If Nvidia hits the growth laid out, it's going to be a great stock to own in 2026.
Image source: Nvidia.
Nvidia's computing units offer advantages over other offerings
Nvidia makes graphics processing units (GPUs), accelerated computing units that can perform multiple tasks in parallel. This makes them great for heavy workloads, like processing gaming graphics, engineering simulations, drug discovery, and mining cryptocurrency.
However, its biggest use case by far is artificial intelligence. AI requires unprecedented levels of computing power, and companies are scrambling to build out as many data centers as possible and fill them with computing units to train and run AI models.
Nvidia's GPUs have been the most popular computing unit option by far since the AI arms race began in 2023. The reason for its success is tied to both the power of its GPUs and the technology stack that supports them. Its chief rival, AMD, may have had competing GPUs, but the supporting technology wasn't as good, so it fell behind.
NASDAQ: NVDA
Key Data Points
Another rising competitor is the AI hyperscalers themselves. Many are tired of paying a premium price for Nvidia's GPUs, so they are partnering with companies like Broadcom to design a custom AI chip in-house. These can be worthy competitors to Nvidia's GPUs when the workload is properly configured, but if it isn't, the GPU is a far better option.
Nvidia's GPUs are still the overall best broad-use computing unit in the AI realm. The GPUs are so popular that Nvidia Chief Executive Officer Jensen Huang stated in the Q3 earnings release that the company is "sold out" of cloud GPUs. In Q3 FY 2026 (ended Oct, 26), it sold $51.2 billion in data center products, which mostly encompass cloud GPUs. For a company to sell more than $50 billion worth of products and still run out of product is incredible.
However, Nvidia is pushing for more production capacity, which will drive growth throughout 2026. But how much can investors expect?
Nvidia's success relies on the spending habits of others
The biggest factor in Nvidia's success isn't its own products; it's how much AI hyperscalers are willing to spend. They spent a record amount on data center capital expenditures in 2025, and all have informed investors to expect more growth in 2026.
This bodes well for 2026, but it's only the beginning. Nvidia sees the AI buildout growing for multiple years beyond next, with annual data center capital expenditures expected to rise from $600 billion in 2025 to $3 trillion to $4 trillion by 2030. That's a 38% compounded annual growth rate (CAGR) at the low end of that projection, and that coincides with Wall Street's projections as well.
Next year, Wall Street analysts expect revenue growth of 48%. Considering that Nvidia trades for 36 times forward earnings right now, I'd say it's fairly valued for the incredible growth it's putting up. As a result, I think it's reasonable for Nvidia to grow at about the same pace as its revenue.
To be a bit conservative, I'll price in 30% growth, that way Nvidia's valuation continues to moderate as well. If it can deliver 30% returns, the stock will be priced at about $221. That's a strong gain for one year, making Nvidia an excellent stock to buy now and hold throughout 2026 and beyond.
