Nvidia’s growth has been astronomical — it has grown its market capitalization from $1.1 trillion to $3.1 trillion in the past 12 months — and one tech investor who predicted the early success of Amazon and Tesla said this is just the beginning.
“Nvidia’s potential scale in the most optimistic outcome is even higher than I’ve ever seen before and could lead to a market value in the double-digit trillions,” James Anderson, former partner at investment giant Baillie Gifford, told . Financial Times. “This is not a prediction, but a possibility if AI works for customers and Nvidia’s direction is intact.”
The chipmaker behind OpenAI’s ChatGPT has grown thanks to the AI boom, which has created half a million new millionaires who invested in technology that is beginning to revolutionize the workplace and media consumption. Nvidia, along with tech giants Amazon, Google, Microsoft, and Apple, is worth $14.5 trillion and makes up about 32% of the S&P 500. With AI data center revenue expected to grow by about 60% , Anderson calculated, if the pattern continues. over the next decade, the company would have a market capitalization of about $49 trillion. That’s more than the entire value of every company in the S&P 500, which is roughly $45.84 trillion. Anderson estimated a 10%-15% probability of this outcome.
Anderson’s projection is high, but his biases have proven correct before. With a go-big-or-go-home mentality, he was one of the biggest champions of Amazon and Tesla (for the EV giant, Anderson’s investments were second only to CEO Elon Musk). From 2005 to 2021, the Scottish Mortgage Investment Trust, managed by Baillie Gifford, saw returns of 2,240%. It invested in Nvidia in 2016. Lingotto Investment Management, where Anderson is now an investor, has a $650 million fund with Nvidia as its largest position.
Nvidia didn’t have a clear path to success when Anderson started investing in the company, he said. Whether it would be a gaming, crypto, or AI company remains to be seen. But it had the advantage of early success, unlike Amazon and Tesla, which “did not start from very profitable and dominant positions, but had to get there.” In some ways, Anderson still sees Nvidia as a nimble company.
“It is the long duration of the development [graphic processing units] use in AI — and not just AI — from excitement, through potential pauses, to transforming the industries that matter most to us,” Anderson said.
Not so fast
Other financial experts do not share Anderson’s positive view of Nvidia. Aswath Damodaran, professor of finance at New York University’s Stern School of Business, argues that Nvidia is riding a wave of early AI optimism.
“The momentum is clearly with Nvidia,” Damodaran said CNBC in May. “They can do no wrong. Everything they touch turns to gold.”
Damodaran said that Tesla experienced a similar growth in 2020, when its market cap increased, peaking in 2021 at 1.2 trillion, only when the stock fell by about 30% this year alone. Meta and Google also faced increased competition that has loosened their grip on the tech world. While Nvidia has the revenue to support its high valuation, expectations for the company’s future may be too steep, he argued. Damodaran said that the AI chip market is not only worth $1 trillion, and the AI market more broadly is worth about $2 or $3 trillion, which means Nvidia will have to tap into some big AI markets to maintain and increase its value.
“It’s clearly a possibility,” Damodaran said. “But is it believable? I do not think so.”
It’s too early to tell whether Nvidia has the ability to lead Big Tech on the AI frontier in the long term, said Deepwater Asset Management managing partner Doug Clinton. Nvidia’s colossal growth may seem daunting, but it’s sustainable, especially as demand for AI is expected to increase.
“Although all of us are concerned that eventually this chip demand will slow, we haven’t seen that slowdown yet,” Clinton said. Yahoo Finance last month. “And it may take longer to slow down than we think.”
With Nvidia accounting for over 80% of the global GPU semiconductor market, the company is likely to continue to climb for the foreseeable future, Clinton said.
“Can Nvidia maintain its dominant position by providing the brains for these AI models?” he said. “I think they can for the next three to five years.”