The GPU giant may continue to grow at an incredible pace.
The last five years have been amazing for Nvidia (NVDA 4.57%) shareholders as the company’s market cap has grown a phenomenal 2,900%, turning a mere $100 investment in the stock half a decade ago into just over $3,000 as of this writing.
The 30x increase in Nvidia stock over the past five years can be justified by the many catalysts that have fueled the company’s growth. Extremely strong demand for its graphics processing units (GPUs) that are deployed in personal computers (PCs), data centers and automotive applications has led to a tremendous increase in the company’s revenues and profits during this period.
NVDA revenue data (TTM) according to YCharts.
Now, it would seem unreasonable to expect Nvidia’s stock to grow another 30-fold over the next half-decade, given that it has a market cap of just over $3 trillion now and is one of the three most valuable companies in the world. big in the world. The entire global economy, by comparison, was estimated to be worth $105 trillion in 2023. However, given the catalysts ahead, there’s a good chance that Nvidia stock could continue to move higher over the next five years, even if these profits may not be as astronomical as those of the last five.
Artificial intelligence is fueling Nvidia’s growth
For Nvidia’s 2024 fiscal year, which ended Jan. 28, its revenue was $60.9 billion, up from $11.7 billion in fiscal 2019. So Nvidia’s top line has quintupled over the past five years. Looking ahead, analysts are predicting that something similar could happen thanks to the massive growth driver that is the artificial intelligence (AI) market.
Mizuho Securities is predicting that Nvidia’s data center revenue alone will grow to $280 billion in 2027, which will coincide with most of Nvidia’s fiscal year 2028. That would be a big increase over The $47.5 billion in data center revenue the company reported in fiscal 2024 (which ended in January of this year and coincided with 11 months of 2023) and the $89 billion in revenue it is projected to generate from this market in current fiscal year 2025.
One reason this prediction may be accurate is that the market for artificial intelligence chips is expected to reach $400 billion in annual revenue in 2027 (which would be fiscal 2028 for Nvidia), according to Nvidia’s peers. AMD. Mizuho’s Nvidia revenue estimate for calendar 2027 (fiscal 2028 for Nvidia) suggests it would control 70% of the AI chip market at that time. Although this would be lower than the 90% plus share the company currently commands in this market, it would still be able to deliver a massive increase in revenue considering the potential size of the AI chip market four years from now fiscal.
What’s worth noting here is that even if the AI chip market takes longer than expected to reach $400 billion in revenue, and even if Nvidia’s share shrinks to 50%, only its revenue from the center of data could quadruple in the coming years. .
These catalysts could give Nvidia an extra boost
Nvidia has other potential growth drivers that could contribute to expanding its top line.
For example, the market for gaming GPUs that are installed in PCs is likely to benefit from an increase in spending on gaming equipment. Statista predicts that the gaming hardware market will generate $161 billion in revenue in 2024 and predicts that it could grow to $241 billion by 2029. Nvidia should be a big beneficiary of this growth considering that it controlled an impressive 88% of the market for PC graphics cards in the first quarter of 2024.
Meanwhile, in its fiscal 2025 first quarter, growing demand for digital twin systems drove revenue in Nvidia’s professional visualization business up 45% year over year to $427 million.
Nvidia is scratching the surface of a potentially huge opportunity in the dual digital market. According to a forecast from Mordor Intelligence, that space could generate $126 billion in revenue by 2029. From this year’s forecast of $26 billion, that would be a compound annual growth rate of 37%. More importantly, Nvidia is building a solid customer base for its digital twin offerings. This was evident from remarks made by CFO Colette Kress at the recent earnings conference call:
Companies are using Omniverse to digitize their workflows. Digital twins powered by Omniverse enable Wistron, one of our manufacturing partners, to reduce end-to-end manufacturing cycle times by 50% and defect rates by 40%. And BYD, the world’s largest electric vehicle maker, is adopting Omniverse for virtual factory planning and retail setup.
Kress added that industrial software developers such as cadences, AnsysDassault, and Siemens-operated are some of the top names that are using its digital twin software. As such, there’s a good chance that Nvidia’s revenue growth over the next five years could match the growth it’s experienced in the past five years. In fact, analysts are predicting that its top line will triple in the space of just three fiscal years (from fiscal 2024 levels of $60.9 billion).
NVDA revenue estimates for current fiscal year data according to YCharts.
Assuming Nvidia reaches $184.5 billion in revenue in fiscal 2027, its top line would have grown at a compound annual rate of 45%. If the semiconductor giant’s growth slows over the next two years to, say, 25% a year, its revenue could reach $288 billion five years from now. That would be close to a 5x increase in its revenue from fiscal year 2024 and almost equal to the growth achieved by the company in the last five years.
Of course, there’s a good chance the company could grow at a faster rate thanks to the catalysts discussed above. That’s why investors who haven’t yet bought this rising stock may still want to consider adding Nvidia to their portfolios. The tech giant looks poised for a lot more upheaval over the next five years.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Cadence Design Systems and Nvidia. The Motley Fool recommends Ansys. The Motley Fool has a disclosure policy.