The AI chipmaker has room to run, but investors should temper their expectations.
If you had invested $5,000 in Nvidia (NVDA -1.95%) 10 years ago, your investment would be worth more than $1.24 million today. The chipmaker minted a lot of millionaires, as its sales of gaming and data center graphics processing units (GPUs) skyrocketed.
But with a market cap of $2.9 trillion, Nvidia is now the third largest publicly traded company in the world after Apple and Microsoft. Could it turn a new $5,000 investment into $1 million again over the next 10 years?
Image source: Getty Images.
Why did Nvidia’s stock soar?
Nvidia is the world’s largest producer of discrete GPUs for high-end PCs and servers. Its GPUs can be used to process high-end graphics in video games, power photo and video editing software, mine cryptocurrencies, and process complex artificial intelligence (AI) tasks.
In the past, Nvidia generated most of its revenue from the PC market. But over the past few years, its data center business eclipsed its PC gaming business as companies scrambled to upgrade their servers to handle new AI applications. All of the world’s leading AI companies — including Microsoft, OpenAI, and Alphabet‘s Google — now use Nvidia’s chips.
From fiscal 2014 to fiscal 2024 (which ended this January), Nvidia’s revenue grew at a compound annual growth rate (CAGR) of 31% as its earnings per share (EPS) rose at a CAGR of 50%. Some of that growth was initially driven by the expansion of its gaming GPU business (which was aided by the booming crypto mining market), but the data center business eventually became its core growth engine. That’s why Nvidia’s growth accelerated significantly in fiscal 2024 as the AI market exploded.
|
Metric |
FY 2020 |
FY 2021 |
FY 2022 |
FY 2023 |
FY 2024 |
|---|---|---|---|---|---|
|
Revenue growth |
(7%) |
53% |
61% |
0% |
126% |
|
EPS growth |
(35%) |
55% |
129% |
(56%) |
600% |
Data source: Nvidia. Chart by author.
From fiscal 2022 to fiscal 2024, the percentage of Nvidia’s revenue that came from data center chips doubled from 39% to 78%. That ratio rose to 87% in the first half of fiscal 2025 — so it’s becoming an all-in play on AI-oriented data center chips.
What are the bull and bear cases for Nvidia?
The bulls believe Nvidia’s growth spurt will continue as the market’s demand for new AI chips outstrips supply. They believe the company’s gross margins — which rose from 62% in fiscal 2020 to 72.7% in fiscal 2024 — will continue to grow as it exercises nearly unmatched pricing power in the booming market. They also say the company’s stock looks reasonably valued at 32 times next year’s earnings.
The bears expect Nvidia’s growth to cool as the AI hype dies down, cheaper competitors like AMD gain ground, and tighter export curbs throttle its sales to China. Many of Nvidia’s top customers have also been developing their own AI accelerator chips to reduce their long-term dependence on the chipmaker.
They’ll also note that Nvidia’s insiders sold 10x as many shares as they bought over the past 12 months — so its upside potential might be limited.
Could Nvidia generate millionaire-making gains in 10 years?
From fiscal 2024 to fiscal 2027, analysts expect Nvidia’s revenue and EPS to grow at a CAGR of 50% and 56%, respectively. Most of that growth should be driven by the red-hot generative AI market, which Fortune Business Insights estimates will grow at a CAGR of 40% from 2024 to 2032.
If Nvidia matches Wall Street’s expectations, grows its EPS at a slower CAGR of 30% from fiscal 2027 to fiscal 2035, and still trades at 30 times earnings, its stock price could rally 840% to $1,110 and lift its market cap to $27 trillion by 2034.
But even in that bullish best-case scenario, Nvidia would only turn a $5,000 investment into $47,000. To make $1 million again, you would need to invest about $106,000 today. Therefore, Nvidia might still help you become a millionaire if you can afford to invest that much cash in a single stock — but it probably won’t replicate its gains from the past 10 years.
In reality, Nvidia’s growth could cool over the next decade as the AI market matures and new competitors carve up the market. Its growth could possibly be hampered by a global recession or other unpredictable macro or regulatory headwinds. Investors should keep all those risks in mind instead of assuming Nvidia’s hot stock will continue its historic rally.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.