Nvidia (NVDA 1.32%) has been one of the market's best-performing stocks over the past three years. At the end of 2022, it traded at (a split-adjusted price of) $14.61, and it closed 2025 at $186.50. That's a nearly 1,200% gain in just three years.
It seems impossible for the stock to repeat that type of performance over the next three years, but let's examine where it could be headed and whether it's still a buy.
Image source: The Motley Fool.
Nvidia's moat
Nvidia has established itself as the king of artificial intelligence (AI) infrastructure. Its graphics processing units (GPUs) are the primary chips used to train large language models (LLMs) and run AI inference. However, the company is more than just a simple chipmaker, and its moat stems from the ecosystem it has built around its chips.
This all starts with its CUDA software platform, which it created as a way to expand the usage of its chips beyond their original purpose of speeding up graphics rendering in video games. While it took a while for GPUs to gain momentum beyond video games, the company smartly pushed CUDA into universities and research labs that were doing early work on AI.
This resulted in a generation of programmers being trained on its platform, and most foundational AI code being written on CUDA. Entire AI frameworks, like PyTorch, were built to be optimized for CUDA.
NASDAQ: NVDA
Key Data Points
Management didn't stop with software, though. It built an entire networking platform for its chips as well. Its biggest edge comes from its proprietary NVLink interconnect system, which lets GPUs talk directly to each other, allowing them to essentially act like one powerful unit.
It later acquired Mellanox and its networking and DPU (data processing unit) technology. Today, networking is actually Nvidia's fastest-growing segment. Last quarter, its networking revenue surged 162% to $8.2 billion.
The importance of Nvidia's ecosystem can be seen in its recently announced Vera Rubin platform, which includes not just its superchips, consisting of one central processing unit and two GPUs, but also networking and DPUs. They can then all be combined into the Vera Rubin NVL72 server and linked together to form Nvidia's DGX SuperPOD supercomputer.
Where Nvidia's stock could be headed in 3 years
Management at Taiwan Semiconductor Manufacturing, the world's largest chip manufacturer, has forecast AI chip demand to have a mid-40% compound annual growth rate (CAGR) over the next few years. Even with increased competition from custom AI application-specific integrated circuits (ASICs), there is no reason to think that Nvidia won't grow at a similar pace to the overall market, given its dominant position and even faster-growing networking portfolio.
The revenue consensus for its current fiscal year, ending in January, is $213.3 billion. With a 45% revenue CAGR, its 2028 revenue (essentially its fiscal year 2029 ending in January) would be around $650 billion.
If the company's adjusted operating expenses increased at an average of 7% quarter over quarter through 2028 (fiscal 2029) and gross margins remained around 73%, and we apply a 15% tax rate on its operating income, Nvidia could generate over $362 billion in adjusted earnings by 2028 (fiscal 2029), or nearly $15 per share at its current share count of 24.3 billion. If it grows revenue by 35% in fiscal 2030, its adjusted earnings per share would be over $20. Place a 20 to 25 forward price-to-earnings ratio on fiscal 2030 projections for the stock, and its share price would be between $400 and $500 in three years.
Below is a basic model of what its revenue and earnings growth would look like.
|
FY2027 |
FY2028 |
FY2029 |
FY2030 | |
|---|---|---|---|---|
|
Revenue |
$320 billion |
$464 billion |
$699 billion |
$877 billion |
|
Revenue growth |
50% |
45% |
40% |
35% |
|
Gross profit |
$234 billion |
$339 billion |
$474 billion |
$640 billion |
|
Adjusted operating expenses |
$28 billion |
$37 billion |
$48 billion |
$63 billion |
|
Operating income |
$206 billion |
$302 billion |
$426 billion |
$577 billion |
|
Net income |
$175 billion |
$257 billion |
$362 billion |
$490 billion |
|
Earnings per share |
$7.19 |
$10.56 |
$14.90 |
$20.18 |
Source: Estimates based on author calculations.
Based on those projections, Nvidia's stock can still double or more in the next three years. That makes it still a buy at current levels.
