Where Will Nvidia Stock Be In 5 Years?

Nvidia has been a breakout stock since 2023, as demand runs hot for the company's enterprise AI solutions. After the chip designer reported triple-digit sales and earnings growth for the first quarter of fiscal 2025, investors are wondering how far NVDA stock can realistically grow in the next five years.

Let's dive in to answer that question, starting with a teaser: Even the conservative view might make your jaw drop.

Nvidia's Current Market Position
Nvidia specializes in semiconductors, primarily microprocessors known as graphics processing units or GPUs. These are used in many applications, including Nvidia's own gaming PCs, autonomous vehicles and 5G RAN networks. But where Nvidia has become dominant recently is in AI-capable chips and related software.

Techspot reports that Nvidia owns 88% of the GPU market as of the first quarter 2024. That compares to 80% market share in the prior quarter. The jump in positioning came at the expense of competitors Advanced Micro Devices (AMD) and Intel (INTC), which both lost share in the first quarter.

Current Financial Health
In the first quarter of fiscal year 2025, Nvidia generated $26 billion in sales and non-GAAP diluted earnings per share of $6.12. Relative to the prior-year quarter, sales grew 262% and non-GAAP diluted EPS was up 461%. The company also increased its gross margin by 12.1 points.

Over the past 18 months, Nvidia has quadrupled its annual sales, added nearly 20 points to its gross margin and increased non-GAAP diluted EPS by more than five times. The stock price has gained nearly 500% as a result.

From a balance sheet perspective, Nvidia is strong. The chip designer's cash balance doubled in 2023, and the company now has more cash than debt.

Where Will Nvidia Stock Be In 5 Years?
In five years, the AI chip market is expected to be worth $311 billion, according to MarketsandMarkets. This translates to a compound annual growth rate of 20.4% from 2024. Applying that growth rate to Nvidia's data center sales, assuming the current annual run rate of about $90 billion, equates to more than $225 billion in AI-related sales by 2029. That alone could justify another doubling of Nvidia's stock price by 2029, assuming the margins don't degrade terribly.

While this line of thinking also assumes Nvidia won't lose market share in AI, which is unlikely, it also ignores the rest of Nvidia's business. Note, too, that other estimates predict a steeper trajectory for overall AI chip sales. As reported by CNBC, Nvidia's competitor AMD expects the AI chip market to reach $400 billion by 2027.

For those reasons, it doesn't feel farfetched to expect Nvidia's market cap to double in the next five years to $6 trillion. That estimate is actually conservative compared to other views. Beth Kindig of the I/O Fund, for example, expects Nvidia to reach $10 trillion in market cap by 2030.

Let's review some of the factors in play for Nvidia going forward.

Growth Drivers
Three growth drivers for Nvidia include its Blackwell platform launch, government demand for AI hardware and data center demand for hardware that supports multiple use cases, such as AI and 5G RAN.

Blackwell: Blackwell GPU architecture incorporates multiple innovations to trim the energy consumption required for developing, training and running large language models (LLM). Nvidia says the platform will lower costs and energy consumption by up to 25 times. Although the chip launch has been pushed back due to a design flaw, Meta Plaforms (META), Alphabet (GOOG) and Microsoft (MSFT) are rumored to have Blackwell orders in place valued at tens of billions.
Government demand: Forbes Senior Contributor Peter Cohan believes governments will increasingly invest in high-performance GPUs to develop their own LLMs, in their language and with their data.
Data center demand: Nvidia's hardware allows data centers to maximize their utilization by supporting generative AI and 5G applications. Utilization and efficiency will continue to be prioritized in the data center as computing demand grows.
Innovation And R&D
Nvidia opened its doors in 1993 with a mission to revolutionize PC and video game graphics. Since then, the company has launched several industry firsts, including the GPU, the mobile GPU, the programmable GPU and the mobile workstation GPU.

In the early 2010s, CEO Jensen Huang identified AI as the company's next big opportunity—roughly a decade before the masses had heard of ChatGPT. Thanks to Huang's forethought and vision, Nvidia has established a dominant first-mover position in a technology that could revolutionize the way business is done.

With its forward-thinking culture and innovation mindset, Nvidia will likely continue to identify opportunities, reinvent and create new markets—at least as long as Huang is running the show.

Market Opportunities
Major market opportunities for Nvidia going forward include AI, gaming and digital-twin technology.

AI: Nvidia's dominance in AI infrastructure is well-documented. While the company may lose some market share as competition heats up, it is well-positioned to capture the bulk of AI value creation over the next five years.
Gaming: Nvidia's AI business now dwarfs its gaming segment in terms of revenue. However, Huang has a vision for synergies between AI and gaming. AI-driven improvements in graphics and game dynamics could inspire a resurgence in the video game market. Nvidia would likely be the driver and main beneficiary of that resurgence.
Digital-twin technology: A digital twin is a virtual replication of a physical object or system, such as a manufacturing line. The twin uses real-time data to simulate the replicated system so it can identify issues and potential optimizations. Beyond efficiency gains, this technology has broader implications for robotics innovation and other generative physical AI applications. Nvidia Omniverse, Nvidia AI and OpenUSD support digital-twin development.
Competitive Landscape
Nvidia is the AI chip leader now, but competition will surely increase over the next five years. The closest competitors today are chipmakers AMD and Intel. Cloud providers are also a threat as they work to develop their own AI solutions. Some of these providers, including Microsoft, Alphabet and Amazon (AMZN), are Nvidia customers today.

Regulatory And Geopolitical Factors
U.S. sanctions on high-performance chips sales to China have already affected Nvidia. These sanctions were first introduced in 2022 and then updated in 2023. Nvidia has developed lower-performance chips that are compliant, but Chinese demand for these so far has been weak.

Chinese sales contributed 17% to Nvidia's fiscal 2024 revenue. Chinese research firm CCID Consulting predicts that China will account for 30% of the global AI market by 2035, according to Reuters.

Risks And Challenges
Three risks to monitor for Nvidia are market volatility, rising competition and the inherent uncertainty of innovation.

Market volatility: Technology is a volatile sector. Stock prices can fluctuate for any number of reasons, some of which may have little to do with Nvidia's business fundamentals. Compounding the volatility risk is AI's potential to create negative headlines around known problems such as hallucinations.
Competition: Any $100 billion market opportunity is going to inspire aggressive competitive behavior. Nvidia is so far ahead of its peers in R&D that the company has been insulated from extreme competition so far. But that won't be the case forever. To remain dominant in AI chips, Nvidia will have to innovate faster and cheaper than everyone else.
Innovation uncertainty: Creating new products requires foresight and savvy resource allocation. There is always the chance money will be spent on products that disappoint. Nvidia has a good track record for identifying massive opportunities early and rising to lead the market, but then the launch of the company's Blackwell platform has been delayed due to a design flaw. Time will tell if Nvidia's rush to stay ahead of the competition will lead to more errors.
Nvidia's Long-Term Investment Potential
Right now, it's hard to imagine Nvidia doing anything but creating more value. The company has a lot going for it: dominance in one of investing's most popular industries, an enviable customer list, tons of cash, a knack for spotting opportunity and a proven process for innovating. These factors position the chip designer well for long-term growth.

It almost sounds too good to be true, which is a good reason to step lightly into a Nvidia position. Yes, the company stands to double or triple in value, again, in the next several years—but it won't be a smooth ride. Given that Nvidia's multiples are well above their five-year averages, you could use the volatility to your advantage. Waiting for a pullback will amplify your growth potential and take some of the stress out of the position.

Bottom Line
Nvidia is a good company with loads of opportunity ahead. Unquestionably, there is long-term growth potential for investors who buy at the right price and can handle a wild ride.