An industry-leading position and strong secular tailwinds should help drive this artificial intelligence (AI) pioneer higher.
Artificial intelligence (AI) has taken center stage over the past couple of years, and there’s good reason to think this is just the beginning. Developers are still coming up with new applications for the technology, which is being harnessed to create original content, streamline business processes, and increase productivity. It’s still early days for the adoption of AI and the evidence suggests spending has only just begun to ramp up.
In fact, the biggest names in technology — Microsoft, Meta Platforms, Alphabet, and Amazon — have announced plans to collectively lay out more than $315 billion for the capital expenditures necessary to support AI in 2025, and these outlays show no signs of slowing.
The undisputable beneficiary of much of this spending is Nvidia (NVDA 3.16%). The company developed the graphics processing units (GPUs) that have become the gold standard for processing AI and could parlay the unrelenting demand into charter membership of the $10 trillion club.
Image source: Getty Images.
From humble beginnings
Nvidia created the GPU in 1999 to create realistic images in video games. The groundbreaking development was parallel processing, which processes a multitude of mathematical computations simultaneously. By breaking up these large computing jobs into smaller, bite-sized chunks, Nvidia’s chips were a game-changer.
Over the years, however, these same processors have proven adept at other applications, including cloud computing and data center operations — where AI lives. The unrelenting demand for these chips has driven Nvidia’s financial results and its stock price to new heights.
The numbers are compelling
Over the past decade, Nvidia’s revenue has grown by 2,950% (as of market close on Monday), while its net income has surged 14,310%. Furthermore, the company’s consistent financial results have fueled a blistering rise in its stock price, which has soared 23,960%.
In its fiscal 2025 third quarter (ended Oct. 27), Nvidia generated record revenue of $35 billion, which surged 94% year over year and 17% sequentially. This fueled adjusted earnings per share (EPS) that soared 103% to $0.81. The headline was the data center business, including chips used for cloud computing, data centers, and AI. Revenue for the segment clocked in at $30.8 billion, up 112%, driven by unprecedented demand for AI.
This could be just the beginning. Goldman Sachs Research estimates the AI market could be worth $7 trillion by 2030, with Nvidia supplying the chips that underpin the technology.
The path to $10 trillion
Nvidia currently sports a market cap of roughly $3.27 trillion (as of this writing). That means it will take stock price gains of 212% to drive its value to $10 trillion. According to Wall Street, Nvidia is poised to generate revenue of more than $129 billion in fiscal 2025, giving it a forward price-to-sales (P/S) ratio of roughly 25. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $402 billion annually to support a $10 trillion market cap.
Wall Street is forecasting annual revenue growth for Nvidia of 40% over the next five years. If the company can attain that benchmark, it could reach a $10 trillion market cap as early as 2029. But don’t take my word for it. Beth Kindig, CEO and lead tech analyst for the I/O Fund, estimates that Nvidia’s market cap will reach $10 trillion by 2030 (emphasis mine): “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 rapid and accelerating adoption of AI, I think Kindig is spot-on in her assessment.
That said, investors should be prepared to deal with the inevitable volatility. Given its meteoric rise over the past few years, any failure on Nvidia’s part — real or imagined — could crater the stock price, a fact we’ve seen play out in recent months.
Reports that Chinese start-up DeepSeek’s R1 model was on par with OpenAI’s o1 model — and was developed using older processors at a fraction of the cost — crushed Nvidia, as the stock plunged 17% and lost $600 billion in market cap in a single day. The popular narrative was that there would be no need to use cutting-edge GPUs when inferior ones would work just as well. Analysts have had time to digest the news and have found some of DeepSeek’s claims to be questionable.
Wall Street expects Nvidia to generate EPS of $4.44 in fiscal 2026, which began in late January. That works out to roughly 30 times forward earnings (as of this writing). That’s well below the stock’s average forward multiple of 42 over the past five years and an attractive price to pay for a company supplying the picks and shovels fueling the AI revolution.
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.
