There's no denying that artificial intelligence (AI) has generated a lot of buzz since early last year. Recent technological advances have taken these algorithms to the next level, enabling them to generate original content of all stripes, improve productivity, and streamline processes.
Companies on the leading edge of this trend have profited from these advances in technology. In fact, six of the world's seven most valuable companies, when measured by market cap, have embraced the paradigm shift of generative AI and staked their claims to profits from these next-generation systems. Topping the charts are Apple and Microsoft, the only two companies that currently boast a market cap of more than $3 trillion.
However, one company that appears ordained to make a name for itself as a founding member of the $10 trillion club is Nvidia(NASDAQ: NVDA). The pioneer in graphics processing units (GPUs) is nipping at the heels of the current leaders with a market cap of $2.8 trillion but seems destined to break new ground.
Let's look at the numerous growth drivers that could send Nvidia stock to new heights.
Image source: Getty Images.
Shall we play a game?
Nvidia revolutionized gaming a quarter of a century ago when the company pioneered the GPU, which produced lifelike images in video games. The secret to its success is parallel processing, or the ability of these advanced chips to process a multitude of mathematical calculations simultaneously. It wasn't long before Nvidia realized the vast potential of this discovery and pivoted to tailor this technology to a host of other applications.
The company has since adapted GPUs to power cloud computing, data centers, machine learning, autonomous driving, generative AI, and more.
The tale of the tape
Over the past 10 years, Nvidia's revenue has grown by 2,350% (as of this writing), while its net income has surged 9,490%. While it hasn't all been in a straight line, the company's consistently strong performance has driven impressive growth in its stock price, which has soared 23,110%.
In its fiscal 2025 second quarter (ended July 28), Nvidia delivered record revenue of $30 billion, up 122% year over year and 15% sequentially. This drove diluted earnings per share (EPS) of $0.67 up 168%. The star of the show was the data center segment, which includes processors used for cloud computing, data centers, and -- of course -- AI. Revenue for the segment surged 154% to $26.3 billion, driven by insatiable demand for AI.
There's likely much more demand ahead. Analysts at Goldman Sachs Research estimate the economic impact of AI at $7 trillion by 2030. Furthermore, the improving macroeconomic backdrop could help accelerate adoption, which would be a boon to Nvidia.
Not a one-trick pony
There's no question that AI is currently Nvidia's biggest opportunity, but it's far from the only one.
Let's not forget that, until recently, GPUs for gaming were the company's cash cow, while AI played second fiddle. During the economic downturn, many gamers made do with their existing processors, waiting for the specter of inflation to subside. As the economic outlook continues to improve and graphics cards come to the end of their useful lives, there's plenty of pent-up demand that could fuel a long overdue upgrade cycle, and Nvidia stands to benefit the most.
In the first quarter, Nvidia controlled 88% of the discrete desktop GPU market, according to Jon Peddie Research. Furthermore, demand is expected to soar over the coming five years, jumping from $3.6 billion in 2024 to $15.7 billion by 2029, a compound annual growth rate (CAGR) of 34%, according to Mordor Intelligence. The market for gaming processors is ripe for a recovery, a trend that benefits Nvidia.
There's also the data center market, which will be driven by the growing adoption of cloud computing. Many businesses are moving their data to the cloud, foregoing on-site storage, another trend that favors Nvidia. It controls an estimated 95% of the data center GPU market, according to Angelo Zino, senior equity analyst at CFRA Research.
It's estimated that the data center market will climb from $302 billion in 2024 to $622 billion by 2030, a compound annual growth rate of 10%, according to data provided by Prescient and Strategic Intelligence Market Research.
Nvidia's supremacy and the growing market puts the company in the pole position of another opportunity. Generative AI isn't the only game in town. The company has a virtual monopoly in the machine learning market, an established branch of AI. The company controls an estimated 95% share of that market, according to New Street Research.
There are other areas that aren't material to Nvidia's growth but could eventually make a meaningful contribution. Self-driving cars aren't yet ready for prime time, and quantum computing is still largely experimental, but either could be a catalyst for the next stage of Nvidia's growth.
This helps illustrate the point that while generative AI is at the heart of Nvidia's recent run-up, other opportunities abound.
The path to $10 trillion
Nvidia currently sports a market cap of roughly $2.78 trillion, which means it will take stock-price gains of 260% to drive its value to $10 trillion. According to Wall Street, Nvidia is poised to generate revenue of nearly $113 billion in fiscal 2025, giving it a forward price-to-sales ratio (P/S) of roughly 24.7. Assuming its P/S remains constant, Nvidia would need to grow its revenue to roughly $405 billion annually to support a $10 trillion market cap.
Wall Street is currently forecasting revenue growth for Nvidia of 47% annually over the next five years. If the company reaches that watermark, it could achieve a $10 trillion market cap as soon as 2029. But don't take my word for it. Beth Kindig, CEO and lead tech analyst of the I/O Fund, has an estimate that's eerily similar:
We believe Nvidia will reach a $10 trillion market cap by 2030 or sooner through a rapid product road map, it's impenetrable moat from the CUDA software platform, and due to being an AI systems company that provides components well beyond GPUs, including networking and software platforms.
Given the company's multiple avenues for growth and the accelerating adoption of AI, I think Kindig hit the nail on the head.
There's a caveat, of course. Given Nvidia's parabolic rise since early last year, any weakness by the company -- real or perceived -- could crush the stock price, at least temporarily. We've seen an example just recently when Nvidia lost nearly a quarter of its value over six weeks between June and July, as investors became skittish about rumors of a delay in the release of its next-generation Blackwell platform.
That said, I would submit that 36 times forward earnings is a reasonable price to pay for a company at the cutting edge of one of the biggest paradigm shifts in technology in a generation.
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Danny Vena has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Goldman Sachs Group, 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.
