Nvidia (NVDA 1.32%) and fellow "Magnificent Seven" stocks Alphabet (GOOG 1.39%) (GOOGL 1.38%), Apple (AAPL 2.05%), Microsoft (MSFT 0.49%), Amazon (AMZN 1.49%), Meta Platforms (META 2.38%), and Tesla (TSLA 2.50%) have increased in value in recent years by so much that they now make up over a third of the total market capitalization of the S&P 500 (^GSPC 1.22%).
The five largest Magnificent Seven stocks by market cap also generate the most net income among U.S. companies, having matured from revenue-driven growth stories into highly profitable cash cows.
Here's why Nvidia, which is currently the fourth-most profitable U.S. company, can surpass Microsoft, Apple, and Alphabet by net income within the next two years, and why the stock is a buy now.
Image source: Getty Images.
Nvidia is breaking records
Nvidia finished 2022 at a split-adjusted price of $14.61 per share and a market cap of $359.5 billion. Exactly three years later, Nvidia closed out 2025 with a share price of $186.50 and a market cap of $4.5 trillion.
Nvidia hasn't just delivered for its shareholders -- it has reshaped markets, with the stock making up a staggering 16.6% of the tech sector, 13.3% of the Nasdaq-100, and 7.1% of the S&P 500.
Normally, such a drastic surge in a relatively short period of time is cause for concern. But Nvidia is unrecognizable from where it was three years ago.
Data by YCharts. TTM = trailing 12 months. EPS = earnings per share.
Nvidia is highly profitable, generates gobs of free cash flow, has sky-high margins, and repurchases more than enough stock to offset its stock-based compensation -- with Nvidia spending $36.27 billion on stock buybacks for the nine months ended Oct. 26, 2025, compared to just $4.75 billion in stock-based compensation.
Nvidia converts more than half of its revenue into after-tax profit and generates, on average, over $2 million in net profit per employee. The stock has performed well because the company is highly efficient and has strong pricing power -- making its earnings high-quality.
Nvidia is gaining ground on legacy tech giants
Nvidia will most likely overtake Alphabet as the most profitable company in the world either this calendar year or next, with Nvidia raking in $99.2 billion in trailing-12-month (TTM) net income compared to $124.3 billion for Alphabet.
Data by YCharts. TTM = trailing 12 months.
Alphabet has a commanding lead -- but Nvidia is growing much faster than Alphabet. However, it's worth noting that Saudi Arabian Oil (SASE: 2222) generated between $106 billion and $161 billion in annual net income between 2022 and 2024. So, if oil prices spike, it could become the most profitable company in any given year. But for the sake of long-term earnings growth, we'll stick with U.S. tech-focused companies.
Data by YCharts. TTM = trailing 12 months. EPS = earnings per share.
Adding over $4 trillion in market cap appreciation in three years is unprecedented, but so is going from less than $15 billion in earnings to likely the most profitable publicly traded company in the world in a five-year span.
Rubin will help Nvidia maintain its high margins
Nvidia has a lot going for it that could lead to soaring earnings in the coming years. For one, it has sky-high operating margins.
Data by YCharts. TTM = trailing 12 months.
In recent years, some investors have been concerned that Nvidia's margins will fall if demand slows and competition eats into its market share. But that hasn't been the case. If anything, I could see Nvidia's margins increasing because of Rubin.
Rubin is the successor to Nvidia's Blackwell semiconductor chip architecture -- which was a game changer for artificial intelligence (AI) data centers. But Nvidia has truly outdone itself with Rubin -- with massive efficiency improvements that should allow its customers to process large data sets magnitudes faster, improving product performance and reducing costs.
Because Rubin is so technologically advanced, Nvidia can justify its premium pricing, which should allow it to convert the bulk of its revenue into earnings. At CES earlier this month, Nvidia said it would surpass its prior estimate of $500 billion in Blackwell and Rubin orders and revenue through the end of calendar year 2026, effectively outlining a well-defined runway for fiscal 2027 earnings, which ends January 2027.
Over the TTM, Nvidia generated $0.53 in after-tax net income per dollar of revenue. If it can continue converting roughly half of sales into net income, another way to look at that $500 billion revenue projection is $250 billion in net income. Not all of that is going to come in one fiscal year, but it still paints a massive runway for Nvidia to eventually surpass Alphabet in earnings within the next two years.
A top buy for 2026
At roughly 40 times forward earnings, Nvidia is a great value, given its breakneck growth rate. If the stock price languishes, the valuation could come down significantly as Nvidia converts its order backlog into realized earnings.
Add it all up, and Nvidia remains one of the best AI growth stocks for long-term investors to buy in 2026 and hold for years to come.
