Where Will Nvidia Stock Be in 3 Years?

Nvidia (NVDA 4.45%) has rewarded its investors incredibly well over the past three years, transforming a $1,000 investment into more than $4,500. This remarkable increase can be attributed to a 354% surge in the company’s stock value, largely due to its dominant role in the lucrative market for artificial intelligence (AI) chips.

During the last three years, Nvidia's stock performance has significantly outpaced the gains of the Nasdaq Composite Index, which saw a modest increase of 23%. The phenomenal returns from Nvidia's stock have been driven by substantial growth in its revenue and earnings, fueled by strong demand from both customers and governments seeking its AI chips for training and deploying AI models.

As we enter 2025, it’s an opportune time to examine Nvidia’s prospects for the next three years and to determine whether this soaring AI stock can continue to deliver value to investors.

Nvidia's Extensive Growth Potential

Nvidia’s business has experienced tremendous growth in the past three years. By the end of fiscal 2025, the company anticipates generating $128.6 billion in revenue—up from $26.9 billion at the end of fiscal 2022. This represents an incredible compound annual growth rate (CAGR) of 68% during this period.

Investors are curious whether Nvidia can maintain this level of growth for another three years. If it were to achieve a 68% CAGR again, Nvidia’s revenue could soar to nearly $610 billion by the end of fiscal 2028. While this figure seems ambitious, Nvidia identifies substantial market opportunities that could make such growth feasible.

CEO Jensen Huang emphasizes that every data center will eventually utilize GPUs to enhance computing efficiency. This shift towards accelerated computing—using specialized hardware to perform tasks more efficiently—will help manage long-term energy consumption in data centers.

Furthermore, growing data center capacity is a favorable trend for Nvidia’s business. According to McKinsey, global data center capacity is expected to expand at an annual rate of 19% to 22% through 2030 due to the rising demand for generative AI. Currently, Nvidia is projected to finish fiscal 2025 with just under $100 billion in data center revenue, indicating substantial growth potential in this area.

Nvidia’s assertion of a potential $1 trillion revenue opportunity in the data center market highlights that it has only tapped into about 10% of what is available in this space. With over 85% market share in the data center GPU segment, Nvidia stands to benefit significantly from the increasing adoption of accelerated computing.

However, Nvidia's growth opportunities extend beyond data centers. Its GPUs are also integral to various applications, including developing digital twins for industries, enhancing gaming experiences, and improving automotive and robotics technologies. Recently, these sectors collectively generated $4.2 billion in revenue, reflecting a 20% increase compared to the previous year.

Continued growth in these areas is expected to bolster Nvidia’s overall performance. For instance, the gaming GPU market is anticipated to generate an additional $49 billion between 2023 and 2028, growing at a CAGR of 21%. Nvidia holds a commanding 90% share in the gaming GPU market, positioning the company to capitalize on growing demand.

Moreover, the market for digital twins is projected to skyrocket to $110 billion in 2028, up from just $10 billion in 2023. Nvidia's GPUs facilitate this growth, enabling virtual modeling of industrial processes and enhancing operational efficiency in businesses like Foxconn and Toyota.

All these factors suggest that Nvidia has multiple drivers of growth that could sustain its impressive performance over the next few years.

Potential Stock Upside for Investors

Having established that Nvidia can likely maintain its outstanding revenue growth, it is essential to consider potential stock price increases. According to consensus estimates from YCharts, Nvidia’s earnings are expected to rise from $2.95 per share in fiscal 2025 to $5.59 in fiscal 2027, indicating a 37% annual earnings growth rate over the next two years.

If we conservatively estimate a 30% earnings growth for fiscal 2028, Nvidia’s earnings per share could reach $7.27. Using the Nasdaq-100's earnings multiple of 33 as a benchmark for tech stocks, this projection suggests Nvidia’s stock price could reach $240.

This potential growth represents a 79% increase from current levels over the next three years. Given that Nvidia is currently traded at 32 times forward earnings, this valuation appears attractive, indicating that investors may still find opportunities to buy into this promising AI stock.

Note: All financial projections are based on estimated figures and market analyses.

Nvidia, Growth, Stock