The name James Anderson may not be immediately recognizable to U.S. investors, but his name will no doubt go down in the annals of legendary investors. He achieved recognition at Scottish investment management firm Baillie Gifford over a nearly 40-year career. Anderson made his mark directing the premier Scottish Mortgage Investment Trust for more than two decades, delivering returns of over 1,700% during his tenure.
Anderson cemented his place in history by spotting the potential of multiple emerging technology companies that went on to become household names. These included Netflix, Alibaba, Amazon, Tesla, and Nvidia (NVDA 1.59%). Recognizing these explosive growth opportunities helped Anderson generate significant profits. Given his credentials and track record of success, investors would do well to heed his advice.
It's still early days for artificial intelligence (AI), according to most experts. Anderson predicts that if AI adoption continues at its current clip, Nvidia's market cap could soar to $50 trillion over the coming decade (not a typo). While that seems implausible, Anderson makes a compelling argument.
Image source: Getty Images.
Dominating the space
Developments in generative AI and the rapid adoption of the technology since it emerged several years ago have been a windfall for Nvidia. The company's graphics processing units (GPUs) were adapted and quickly became the clear choice for processing AI. The combination of robust demand and relentless innovation has catapulted Nvidia to become the world's largest publicly traded company, valued at $4.55 trillion (as of this writing).
Despite two consecutive years of triple-digit, year-over-year revenue growth, Nvidia's results remain robust. In its fiscal 2026 third quarter (ended Oct. 26), the chipmaker reported record revenue of $57 billion, which surged 62% year over year, fueling earnings per share (EPS), which soared 67% to $1.30. Nvidia is forecasting accelerating growth, as its guidance calls for Q4 revenue of $65 billion, which would represent growth of 84%. Yet, there could be much more to come.
Anderson predicts the data center market is poised to grow by 60% annually, fueled by demand for AI. Assuming Nvidia maintains its current profit margin and AI adoption continues at its current pace over the coming decade, Nvidia could deliver EPS of $135 and free cash flow of $100 per share, according to Anderson's calculations. Using a 5% free-cash-flow yield, the stock price could rise to roughly $2,000 per share, driving Nvidia's market cap to nearly $49 trillion within 10 years.
Nvidia continues to dominate the data center GPU, with a stunning 92% of the market, according to IoT Analytics. Moreover, the company's "persistent exponential progress, the competitive advantages in hardware and software, and the culture and leadership, are exactly what we look for," Anderson said.
NASDAQ: NVDA
Key Data Points
The fine print
Given the number of variables in this equation, there are plenty of things that could go wrong and stop Nvidia from achieving this Herculean task. Fears of an AI bubble could prove true, a rival could develop a better alternative, or AI could fail to achieve mass adoption. These are just a few of the hurdles that could derail Nvidia's progress.
Anderson acknowledges that this "Isn't a prediction but a possibility if artificial intelligence works for customers and Nvidia's lead is intact." In fact, he admits the odds of this happening are between 10% and 15%.
However, investors shouldn't miss the big picture. "It is the long duration of the development of [GPU] usage in AI -- and not just AI -- from excitement, through potential pauses, to transformation of industries that is most important to us," Anderson said.
Given the possibility, it isn't unreasonable to assume that Nvidia stock will be much higher in the years to come. Furthermore, trading at just 24 times next year's expected earnings, I'd argue that's a compelling price to pay for a company with so much potential.
Perhaps more importantly for investors, Nvidia doesn't have to hit $50 trillion over the next 10 years to be a market-beating investment. Even if Anderson's hypothesis is directionally accurate, Nvidia shareholders will still likely be wildly successful.
That's why I believe Nvidia stock is a buy -- $50 trillion market cap or not.
