Buying and holding solid companies for the long run is a smart investment strategy as it allows investors to benefit from the power of compounding, while also allowing them to capitalize on disruptive trends that tend to shape our lives.
The stock’s stellar rise during this period has been fueled by multiple growth trends such as the growing adoption of graphics cards in personal computers (PCs) and workstations, the increasing integration of semiconductors within vehicles, cryptocurrency mining, and the booming demand for cloud computing applications where its graphics processing units (GPUs) are coming in handy.
Thanks to these catalysts, Nvidia is (at the time of this writing) the world’s largest company with a market cap of $3.58 trillion. Expecting Nvidia to replicate the phenomenal gains that it recorded over the past decade over the next 10 years as well would be absurd given how big it has become already. After all, a 270x jump from current levels would put Nvidia’s market cap at a whopping $966 trillion, which would be illogical considering that the global gross domestic product (GDP) is forecast to hit $139 trillion in 2029, growing at a compound annual rate of less than 5% (from 2023 levels of $105 trillion).
Still, Nvidia could turn out to be a solid pick for investors looking to construct a million-dollar portfolio considering that it still has a lot of room for growth. Here’s a closer look at some of Nvidia’s end-market opportunities that could help this semiconductor stock sustain its red-hot run for a long time to come.
Nvidia stock received a massive boost in the past couple of years thanks to its dominant position in the GPU market, as these chips are being deployed in huge numbers in data centers for AI training and inference. Nvidia’s GPUs are used by all the major cloud computing providers, including Microsoft, Alphabet, Amazon, and Meta Platforms. Governments across the globe are also buying Nvidia chips to fuel their AI ambitions.
This puts Nvidia in a solid position to maintain outstanding growth over the next decade. That’s because the size of the global GPU market is expected to jump from $56 billion last year to $1.4 trillion in 2034, according to Precedence Research. Nvidia reportedly commands somewhere between 70% and 95% of the AI GPU market, according to Mizuho Securities (as reported by CNBC).
More importantly, Nvidia leaves its AI chip rivals in the dust thanks to its early move into this niche, as well as the company’s ability to stay ahead technologically. As a result, it is not surprising analysts are expecting Nvidia’s data center business to grow rapidly based on the robust demand for its AI chips.
Nvidia also dominates the market for GPUs that are deployed in computers and workstations. Jon Peddie Research (via Tom’s Hardware) points out that Nvidia controls a whopping 88% of the market for discrete GPUs that are used in computers. This should open another terrific long-term growth opportunity for Nvidia as the adoption of AI-enabled PCs is set to grow at an incredible pace.
Nvidia is expected to generate an estimated $125.6 billion in revenue in the current fiscal year as per consensus estimates compiled by Yahoo! Finance. That would be an increase of 125% from the previous fiscal year, and the massive revenue opportunity present in the GPU market suggests that Nvidia may be able to keep growing at a healthy rate in the long run.
However, Nvidia has other lucrative growth opportunities as well where it is making solid progress.
Nvidia has been looking to diversify itself by entering the enterprise software market. On its August earnings conference call, management pointed out that its software, software-as-a-service (SaaS), and support revenue should hit a $2 billion annual revenue run rate by the fourth quarter of fiscal 2025. That would be double the $1 billion revenue run rate this business recorded in the fourth quarter of fiscal 2024.
It is easy to see why Nvidia has been able to double this segment’s growth rate in the past year. The company offers software platforms to enterprises to help them build and deploy generative AI applications. There is a solid chance of Nvidia’s enterprise AI software offerings gaining more momentum as they allow enterprise customers to build, deploy, and customize AI models without having to break the bank.
As a result, Nvidia could be on its way to tapping a massive opportunity in the AI software market, a space that’s expected to generate a whopping $391 billion in revenue in 2030 as per ABI Research.
Meanwhile, the rapidly growing adoption of digital twins could unlock another tremendous opportunity for the chipmaker. A digital twin is a virtual representation of a real-world physical object or process, and it is being adopted by several companies to improve the efficiency of their processes and factories. Nvidia has been gaining good traction in this market, with management pointing out on the previous earnings conference call that companies such as Foxconn, Mercedes-Benz, and WPP are some of the global enterprises tapping its solutions to build digital twins.
Again, this is another potentially huge opportunity for Nvidia as Precedence Research estimates that the digital twin market could be worth $383 billion in 2033 as compared to $14 billion in 2023.
We have already seen that Nvidia is on track to earn $125 billion in revenue this year. Investors should note that the company estimated a total addressable market (TAM) of $1 trillion on its investor day in March 2022. However, that figure is likely to have moved higher.
CEO Jensen Huang remarked recently that the company sees a $1 trillion revenue opportunity in the data center space alone thanks to the transition to accelerated computing from general-purpose computing (done using central processing units). Given that accelerated computing is enabled by the GPUs that Nvidia sells and a market that it currently dominates, its TAM is likely to be much bigger right now.
All this probably explains why there are expectations on Wall Street that Nvidia could achieve a $10 trillion, or even a $50 trillion valuation in the future. Consensus estimates are also upbeat about Nvidia’s prospects, expecting its earnings to increase at an annual run rate of 57% for the next five years.
As such, it won’t be surprising to see this supercharged growth stock continuing its red-hot stock market momentum in the long run. That’s why investors looking to make a million-dollar portfolio can consider buying it even after the outstanding gains it has delivered in the past decade.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, 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.
Meet the Supercharged Growth Stock That Could Make You a Millionaire was originally published by The Motley Fool
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