How High Can Nvidia Stock Go?

At the beginning of June last year I wrote an article with an identical title to try to find out how positive it is Nvidia (NVDA -0.36%) supplies capable of delivery and I have to admit that my prediction was way off.

Nvidia shares have shot up 196% since this article was published last year, more than tripling in value. My estimate was that the value of this high-performance semiconductor stock could nearly double over a three-year period, but it far exceeded those expectations.

Let’s take a look at why that was and see how much this top chip maker can deliver after the excellent gains it made last year.

Nvidia’s growth beat Wall Street expectations by miles

A year ago, analysts expected Nvidia to post revenue of $42.9 billion and earnings of $7.68 per share in fiscal 2024. Instead, the company ended the fiscal year with adjusted earnings of $12.96 per share on revenue of $60.9 billion. It’s also worth noting that analysts have predicted that Nvidia will reach $50.6 billion in revenue in fiscal 2025 and $62.7 billion in fiscal 2026.

However, as the following chart shows, analyst expectations for Nvidia have simply skyrocketed over the past year.

NVDA revenue estimates for current fiscal year data according to YCharts

That’s not surprising, as the chipmaker has been posting better-than-expected quarter-on-quarter growth thanks to massive demand for artificial intelligence (AI) chips. For example, in the first quarter of fiscal 2025 (which ended April 28), Nvidia’s revenue rose 262% year-over-year to $26 billion, and earnings rose 461% to $6.12 per share.

Such strong growth has led analysts to further raise the company’s growth expectations, as reflected in the previous chart. Nvidia CEO Jensen Huang says this amazing growth is here to stay as “companies and countries work with Nvidia to shift trillions of dollars of traditional data centers to accelerated computing and build a new type of data center—artificial intelligence factories—to produce a new commodity: artificial intelligence.”

Investors should note that Nvidia is pioneering the spread of AI with its hardware and software offerings. The company commanded a massive 94% of the AI ​​graphics processing unit (GPU) market last year, and despite the efforts of its competitors, it’s seeing little competition in the space. With the global GPU market forecast to grow at an annual rate of 31% through 2032 and generate annual revenue of $594 billion by the end of the forecast period, there is scope for Nvidia to grow at a strong rate over the long term.

In addition, Nvidia has other catalysts outside of the AI ​​data center market. It is also the leading provider of GPUs used in personal computers (PCs) with an estimated market share of 88%. This puts the company in a solid position to see healthy incremental growth in the future due to the lucrative opportunity in the GPU market as a whole.

Healthy earnings growth points to higher growth

Investors have already seen how fast Nvidia’s top line is expected to grow over the next three fiscal years. The good thing is that revenue growth is set to filter down to the bottom line as well. Analysts expect the company’s earnings to grow at an annual rate of 43% over the next five years. Based on its fiscal 2024 earnings of $1.21 per share, Nvidia’s earnings could climb to $7.24 per share five years from now.

By multiplying the expected profit after five years with Nasdaq-100A forward earnings multiple of 29 (using the index as a proxy for tech stocks) points to a share price of $210. That would be a 78% jump from current levels.

However, with the trillion-dollar end-market opportunity the company sits on and the rapid pace at which its end-markets, such as AI chips, are growing, it will come as no surprise that these tech stocks are delivering stronger gains. in the next five years and will exceed the $200 Street-high price target.