What will Nvidia’s stock price be like in five years?

These past five years have been very fulfilling. Nvidia (NVDA 4.17%) investors. The semiconductor specialist’s stock is a solid multibagger, with a $1,000 investment in January 2019 turning into $14,550 as of this writing.

NVDA data by YCharts.

The impressive rise in Nvidia’s stock price over the past decade can be attributed to the company’s impressive revenue and revenue growth. This growth is driven by a surge in demand for gaming hardware, increased demand for high-performance computing applications, increased adoption of semiconductors in automobiles, and the need for graphics cards to train artificial intelligence (AI) models, among other factors. Facilitated by multiple catalysts.

The good news is that NVIDIA is poised to deliver even stronger returns over the next five years through an aggressive product roadmap. This should allow us to take advantage of multiple multi-billion dollar opportunities. It’s worth noting that the company noted several years ago that it sees a $1 trillion revenue opportunity across several end markets, including automotive, gaming, enterprise software, and chips and systems.

Given that Nvidia is scheduled to end fiscal year 2024 (ending this month) with $59 billion in revenue, Nvidia’s revenue and profit growth will accelerate significantly over the next decade as it penetrates deeper into its target markets. It’s not surprising that it does. Let’s take a look at why this is so, and what the stock price will be in five years.

Nvidia is growing at an incredible pace and shows no signs of slowing down

When Nvidia reported its fiscal 2019 results five years ago, the company had annual revenue of $11.7 billion. Therefore, Nvidia’s revenue is on track to increase five times over five years considering the forecast for fiscal year 2024, translating to a compound annual growth rate (CAGR) of 38%. If he achieves a similar CAGR over the next five years, his Nvidia’s annual revenue in 2029 will reach a whopping $295 billion.

But some Wall Street analysts believe Nvidia can do even better. Take Mizuho analyst Vijay Rakesh, for example. He predicts that AI chip sales alone could generate $300 billion in annual revenue by 2027, as NVIDIA has a solid 75% share in this fast-growing market. doing. That may seem far-fetched at first glance, but a closer look at the AI ​​chip market shows that Nvidia may actually achieve its ambitious goals.

It’s no secret that Nvidia is the biggest player in one of the hottest technology niches right now: AI chips. This has enabled the company to record significant increases in sales and profits over the past year.

NVDA Revenue (TTM) Data by YCharts

Note that this AI chip market is at the beginning of a huge growth curve.Nvidia’s rival Advanced Micro Devices It is estimated that the market for AI accelerators could surge to $400 billion in 2027, a significant increase from last year’s estimated $45 billion. Citi analysts expect NVIDIA to maintain a massive 90% share of this market over the next two to three years, despite efforts by rivals to narrow NVIDIA’s lead in the market. Expect.

This is because Nvidia is doubling down on the pace of innovation in AI chips, which should help it maintain a solid share of this market in the long run. So we can’t rule out the possibility that Nvidia will actually generate $300 billion in annual revenue from sales of his AI chips in five years. Given that the overall AI chip market size is expected to reach $400 billion, according to AMD estimates, even if the share drops to 75%, as Rakesh suggests, it will not be possible to reach that level. There is a possibility that it will be reached.

The good news is that Nvidia is expanding its reach beyond the AI ​​accelerator market. The company recently launched new consumer-grade graphics that can be used to run AI applications on desktops and laptops for gaming, creating large-scale language models (LLMs), customizing generative AI models, and even inference applications. The card has been announced. For example, Nvidia claims that its new RTX 4080 Super graphics card “produces AI videos 1.5x faster and images 1.7x faster than the GeForce RTX 3080 Ti GPU.”

Considering that demand for devices capable of running AI at the edge, such as smartphones, personal computers, and cameras, is expected to grow 26% annually through 2032, reaching $143 billion in annual revenue by the end of the forecast. , Nvidia is doing the right thing by tapping into this market early.

And given the other notable catalysts that NVIDIA could benefit from, it wouldn’t be surprising if the company’s revenue approaches $300 billion in five years. If that’s the case, investors can expect the stock to see another big rally over the next five years.

Investors can expect to get rich with the stock.

Nvidia’s five-year average price-to-sales ratio is 20. As we assume the company’s revenue growth rate over the next five years matches the rate recorded over the past five years, we can expect Nvidia to remain average. Sales will also double in the next five years. Based on a five-year top line of $300 billion, a sales multiple of 20 indicates his market cap will be a whopping $6 trillion. This would far exceed Nvidia’s current market capitalization of approximately $1.35 trillion.

However, NVIDIA’s discounted forward price to sales ratio is 14 times. Assuming a similar multiple in five years, using the $300 billion revenue estimate, his market cap could increase to $4.2 trillion. Again, this shows that over the next five years he will see Nvidia’s stock price rise three times as much as he did.

All of this indicates that investors can expect Nvidia to rise significantly over the next five years, doubling down on their investment once again and making it a top growth stock to buy now.