Nvidia, a tech giant with a market cap of $3 trillion, has seen its shares soar by 22,000% over the last decade, making it one of the most successful companies in terms of shareholder wealth. However, growing concerns about the sustainability of AI hardware spending have raised questions about how much more the company can realistically rise.
The AI hype cycle is getting long in the tooth, with tech giants pouring billions of dollars into purchasing Nvidia’s cutting-edge graphics processing units (GPUs) to train and run large language models (LLMs). While hyperscalers like Alphabet and Amazon see clear business sense in this spending, other major clients like Meta Platforms may be overextending themselves.
Despite current AI spending challenges, Nvidia’s operational momentum remains strong. The company’s third-quarter revenue jumped 94% to $35.1 billion, driven by massive demand for high-end data center chips. Its gross margin of almost 75% rivals that of many software companies, and operating income roughly doubled to $21.9 billion.
New products based on Nvidia’s Blackwell GPU architecture promise continued growth and profitability, and there is little evidence that a low-cost Chinese rival like DeepSeek is hurting demand for its newest chips. However, the emergence of such rivals raises concerns about the long-term sustainability of AI hardware spending.
Nvidia’s valuation remains attractive, with a forward price-to-earnings multiple (P/E) of 29. But considering its incredible growth rate and market cap, it’s hard to see the company generating multibagger returns from here. The stock’s millionaire-maker days seem to be far behind, and return-hungry investors should look for more under-the-radar ways to bet on the AI opportunity.
Source: https://www.fool.com/investing/2025/02/09/is-nvidia-still-a-millionaire-maker-stock