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Nvidia has the most powerful computer chips, and the major AI developers rely on them to drive their businesses.
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The total AI opportunity is expected to increase at a high rate over the next five years.
Nvidia (NASDAQ: NVDA) has been that rare stock that has catapulted investors to millionaire status on its own. But up more than 1,500% over the past five years, and with a $4 trillion market cap, can it really still offer growth for investors?
It can. Here’s why.
All signs are that artificial intelligence (AI) will continue to drive innovation over the next few years as more businesses see how it can help them succeed and grow. As there’s greater development in AI, it becomes cheaper and more abundant, and companies that aren’t using it to become more efficient and user-friendly are losing out.
Nvidia is the leader in the graphics processing units (GPU) that power these trends, with an overwhelming amount of market share. The AI market is growing at a fast pace, and the major players, like Amazon and Microsoft, need Nvidia’s powerful chips to drive their efforts. Even companies like Amazon that are creating their own chips to offer more budget-conscious options still partner with Nvidia for their larger clients’ needs.
According to Statista, the AI market is expected to increase at a compound annual growth rate (CAGR) of 26.6% over the next five years. That’s slower than Nvidia’s current revenue growth. If you can imagine Nvidia keeping up such a CAGR for its own sales, keeping its price-to-sales ratio constant, that would lead to its stock price nearly tripling.
Even if the price-to-sales ratio decreases, there could be some serious gains ahead for Nvidia investors over the next five years and beyond.
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