Legendary investor James Anderson has sparked excitement among investors with his bold prediction that Nvidia could reach a market value of $50 trillion in the next decade. With its dominance in the gaming and data center GPU markets, Nvidia’s fortunes have soared over the past couple of years, driven by the increasing adoption of artificial intelligence (AI).
In 12 months, Nvidia’s market cap has grown from $1.2 trillion to $3.2 trillion, with its most powerful graphics processing units (GPU) becoming the gold standard for AI processing. The company’s results have been phenomenal, generating five consecutive quarters of triple-digit percentage growth and a revenue of $91 billion in the first nine months of its fiscal 2025.
Anderson believes that demand for AI chips used in data centers is increasing by about 60% annually, giving Nvidia an opportunity to reap a significant share of the growing market. He estimates that if this growth continues at the same pace and Nvidia maintains its profit margins, it could reach an EPS of $1,350, translating to a market cap of roughly $49 trillion.
However, there are potential roadblocks to consider, including widespread AI adoption failing to materialize, significant competition emerging, and supplier disagreements. Anderson acknowledges that the probability of Nvidia reaching this lofty height is slim, with a 10% to 15% chance.
Despite these uncertainties, Anderson remains focused on the long-term potential of Nvidia’s innovation and its dominance in the market. The company’s valuation seems relatively expensive at first glance but is historically cheap compared to other high-growth stocks.
In conclusion, while asking whether Nvidia could hit $50 trillion might be the wrong question, investors should consider investing in an industry leader with a proven track record of innovation, driven by secular tailwinds. With its attractive price relative to opportunity and long-term growth potential, Nvidia is definitely a buy.
Source: https://www.fool.com/investing/2024/12/21/meet-the-supercharged-growth-stock-thats-1-of-2024