A lot of ink has been spilled about the potential for artificial intelligence (AI), and with good reason. Since the dawn of AI early last year, companies have been flocking to the technology, which promises to streamline processes, create original content of all stripes, and dramatically increase productivity. The potential has businesses ponying up to reap the windfall of AI, and spending is increasing at a blistering pace.
In fact, spending by the four horsemen of big tech -- Microsoft, Meta Platforms, Alphabet, and Amazon -- is expected to hit nearly $250 billion for the capital expenditures to support AI this year, with no end in sight.
If there's one unquestionable beneficiary of all this spending, it's Nvidia (NASDAQ: NVDA). The company supplies the graphics processing units (GPUs) that are powering the AI revolution and will likely ride that wave to become a founding member of the $10 trillion club.
Yet, beyond its AI prowess, Nvidia has a number of other growth drivers that could help propel the stock to new heights.
Image source: Getty Images.
From humble beginnings
Nvidia pioneered the GPU back in 1999 to render lifelike images in video games. This was made possible thanks to parallel processing, or the ability to conduct a multitude of mathematical calculations simultaneously. By breaking up a computing task into smaller, more manageable bits, Nvidia revolutionized an industry -- but that was just the beginning. The chipmaker soon pivoted, applying the same technology to a number of other applications and breaking ground across the tech landscape.
Nvidia GPUs are now a staple in data centers, cloud computing, autonomous driving, machine learning, and, most recently, generative AI.
The numbers tell the tale
During the past 10 years, Nvidia's revenue has grown by 2,300% (as of market close on Wednesday), while its net income has surged 8,460%. While it's been a rollercoaster ride, the company's consistently strong financial performance has driven impressive growth in its stock price, which has soared 29,050%.
In its fiscal 2025 third quarter (ended Oct. 27), Nvidia delivered record revenue of $35 billion, up 94% year over year and 17% sequentially. This drove adjusted earnings per share (EPS) of $0.81, up 103%. Fueling the results was the data center segment, which includes chips used in AI, data centers, and cloud computing. Revenue for the segment surged 112% to $30.8 billion, driven by unquenchable demand for AI.
Given that demand, the runway ahead is long. Analysts at Goldman Sachs Research estimate the market for AI could top $7 trillion by 2030. Furthermore, thanks to the improving economy, businesses are more willing to invest in this new and revolutionary technology, a trend that will benefit Nvidia.
Many ways to win
The growing adoption of AI is clearly Nvidia's biggest opportunity, but there are others.
Before the advent of AI, gaming had long been Nvidia's primary growth industry. That changed over the past few years when its dominance was usurped by AI. The segment still represents 10% of Nvidia's revenue, and it could see significant upside now that the economy is on the mend. Inflation took a toll on the gaming business, as users made do with their existing graphics cards, biding their time until conditions improved. Now, many industry experts believe pent-up demand is about to be unleashed, causing a long-awaited upgrade cycle, especially as we head into the holiday season.
In the second quarter, Nvidia captured 88% of the discrete desktop GPU market, according to Jon Peddie Research. While the industrywide third-quarter results aren't yet available, Nvidia's dominance isn't expected to change. Furthermore, demand for videogame processors is expected to surge over the next five years, jumping from $3.6 billion in 2024 to $15.7 billion by 2029, a compound annual growth rate (CAGR) of 34%, according to Mordor Intelligence. As the leading provider of cutting-edge gaming processors, Nvidia is likely to benefit from these secular tailwinds.
Let's not forget the data center market, which was already experiencing robust growth thanks to the digital transformation. As the demand for cloud computing grows, so too does the need for data centers to support that growth. Nvidia controls an estimated 95% of the data center GPU market, according to CFRA Research analyst Angelo Zino. Furthermore, it's estimated that the data center market will more than double, climbing from $302 billion in 2024 to $622 billion by 2030, a compound annual growth rate of 10%, according to Prescient and Strategic Intelligence Market Research.
While generative AI is making all the headlines, there are established branches of AI that are powered by Nvidia's processors -- including machine learning. The company dominates an estimated 95% share of that market, according to New Street Research.
Nvidia's dominance and the expectations for continued growth in each of these markets give the company plenty of additional low-hanging fruit to pluck.
The path to $10 trillion
Nvidia currently sports a market cap of roughly $3.58 trillion, which means it will take stock price gains of 179% to drive its value to $10 trillion. According to Wall Street, Nvidia is poised to generate revenue of nearly $126 billion in fiscal 2025 (which ends in January), giving the stock a price-to-sales (P/S) ratio of roughly 28. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $352 billion annually to support a $10 trillion market cap.
Wall Street is currently forecasting revenue growth for Nvidia of 47% annually over the next five years. If the company can achieve that benchmark, it could achieve a $10 trillion market cap as soon as 2028. While that might seem ambitious, I'm not the only one who believes it's only a matter of time. Beth Kindig, CEO and lead tech analyst for the I/O Fund, calculates that Nvidia will reach a $10 trillion market cap by 2030:
We believe Nvidia will reach a $10 trillion market cap by 2030 or sooner through a rapid product road map, its impenetrable moat from the CUDA [Compute Unified Device Architecture] software platform, and due to being an AI systems company that provides components well beyond GPUs, including networking and software platforms.
Given the multiple paths for growth ahead and the rapid and accelerating adoption of AI, I think Kindig has done her homework.
That said, Nvidia isn't for the faint of heart. This past summer, the stock plunged 27% in just six weeks between June and July as reports suggested the launch of its AI-centric Blackwell chips could be delayed. Cooler heads have prevailed since then, and the stock has run to new heights. But the lesson stands.
Wall Street expects Nvidia to generate EPS of $4.20 in fiscal 2026, which begins in late January. That works out to roughly 33 times forward earnings (as of this writing). I think that an attractive price to pay for a company supplying the gold standard processors needed to power one of the most important technology shifts in a generation.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, 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.
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