This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Nvidia (NASDAQ: NVDA) is the second-largest company in the world with a market cap of $3.3 trillion as of this writing, and the chip designer has reached this position thanks to its ability to remain ahead of disruptive tech trends over the years.
From making graphics cards for personal computers (PCs) to manufacturing powerful artificial intelligence (AI) chips for the training and deployment of powerful large language models (LLMs) to creating digital twins of real-world objects, Nvidia has come a long way since it was founded in 1993. The good part is that this tech giant still has room for more upside and it could even attain a $5 trillion valuation in the next three years.
Let's take a closer look at the catalysts that could propel Nvidia toward that valuation.
Nvidia's GPU dominance should continue to power the company's growth
The terrific demand for Nvidia's AI graphics cards has played a central role in bringing the company's market cap to where it is now. Specifically, Nvidia stock has shot up nearly eightfold since OpenAI's popular chatbot ChatGPT was released in November 2022. Nvidia provided the graphics processing units (GPUs) needed to train ChatGPT, and it has remained the dominant force in the AI chip market since then.
The company reportedly commanded a whopping 92% of the data center GPU market last year. What's worth noting is that Nvidia is still the go-to supplier of AI GPUs for the top cloud computing companies and governments. The company's revenue in the first quarter of fiscal 2026 (which ended on April 27) is projected to jump by 65% from the year-ago period to $43 billion.
Its nearest competitor in the AI GPU market, Advanced Micro Devices, witnessed year-over-year revenue growth of 36% in Q1 this year to $7.4 billion. Nvidia, therefore, is still maintaining stronger growth levels despite having a much larger revenue base, driven by its terrific market share in AI GPUs. The data center segment accounted for 88% of the company's top line last year, and it is going to play a central role in helping Nvidia reach a $5 trillion valuation.
That's because the size of the global GPU market is expected to grow by a whopping $388 billion between 2024 and 2028, according to market research and advisory company TechNavio. TechNavio points out that this massive incremental revenue opportunity in GPUs will be driven by the growing demand for these chips in both computer gaming and high-performance computing.
What's worth noting here is that Nvidia is the dominant player in the PC GPU market as well with a market share of over 80%. So, Nvidia is in a very solid position to capture a massive share of this lucrative opportunity. In fact, it could witness remarkable revenue growth over the next three years even if it loses ground in the GPU market.
If we assume that Nvidia's share of AI and PC GPUs falls to even 70% over the next three years, it could pull in around $270 billion in additional revenue based on TechNavio's projection. The company generated $130.5 billion in revenue in fiscal 2025 (which ended on Jan. 26), which means that it could end up generating $400 billion in annual revenue in fiscal 2028, significantly higher than consensus estimates.
NVDA Revenue Estimates for Current Fiscal Year data by YCharts
Nvidia is currently trading at nearly 26 times sales. Assuming it trades at even half of that multiple after three years and hits the projected $400 billion revenue, it could indeed become a $5 trillion company. But can the company indeed clock such outstanding revenue growth?
The road to a $5 trillion valuation
Nvidia's ability to triple its revenue in the next three years depends on two factors.
First, the GPU market will have to keep growing at a healthy pace. A big reason why the demand for GPUs deployed in data centers could keep rising is because of the shift toward accelerated computing. Data centers are expected to make a major transition from central processing unit (CPU)-based computing to GPU-based computing because of key advantages such as faster computing and less power consumption.
A big reason why the shift toward GPU-powered computing could gain momentum is because of the huge energy savings that could be achieved. Data center electricity consumption is expected to double by 2030, and GPU-accelerated computing is expected to help keep a handle on that because of its ability to complete tasks more quickly.
Nvidia sees a $1 trillion revenue opportunity in data centers thanks to the move toward accelerated computing. Given that it generated $115 billion in revenue from the data center segment last fiscal year, it still has massive room for growth in this space.
The second factor that will decide Nvidia's revenue growth over the next three years is its ability to sustain its market share in GPUs. A big reason why it is likely to remain the dominant player in this space is because of its deep relationship with foundry giant Taiwan Semiconductor Manufacturing, popularly known as TSMC.
Nvidia relies on TSMC's technology and fabrication plants for manufacturing its chips. It is worth noting that TSMC is the world's leading foundry and enjoys a substantial lead over rivals thanks to its superior technology. Nvidia is now expected to become the biggest consumer of TSMC's AI-focused silicon wafers, capturing a massive 77% of the latter's production capacity this year as compared to 51% last year.
This solid control over the supply chain is likely to help Nvidia maintain its AI chip dominance. As such, it won't be surprising to see Nvidia actually tripling its revenue in the next three years, especially considering that it has additional catalysts coming into play as well beyond AI. That's why investors should consider buying this AI stock -- it seems built for more upside following the tremendous gains that it has clocked in recent years.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
