This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
After soaring more than 800% between 2023 and 2024, Nvidia (NASDAQ: NVDA) stock came to a screeching halt this year. Investors are worried about its long-term future, and they're also concerned about how tariffs might hurt it in the short term.
So far, company performance has been easing their fears. Nvidia sailed past expectations in the fiscal 2026 first quarter (ended April 27), and the stock jumped. Can that continue? Let's see whether a $10,000 investment in Nvidia stock today could become $1 million in 10 years.
Can anyone catch its lead?
Nvidia is the leader in graphics processing units (GPU), the chips that drive power-intensive applications like generative artificial intelligence (AI) and gaming. It has as much as 95% of the overall market, and the market, especially for data centers that support generative AI, is expanding rapidly.
It has been a leader in GPUs for years, but its growth accelerated significantly with the development of generative AI, and it continues to experience fantastic growth. Sales increased 69% year over year in the first quarter, beating analyst expectations, and non-GAAP (adjusted) earnings per share (EPS) were $0.81, topping the $0.75 that analysts were expecting.
Huang did give some warnings. Nvidia's top and bottom lines were hit because it's limited by law in what it can ship to China, and it incurred a $4.5 billion charge related to shipments that had to be scrapped in the first quarter. Non-GAAP gross margin was 61% instead of 71.3%, and EPS would have been $0.96. Longer term, Huang is worried that shutting the U.S. out of China gives China an incentive to develop its own strong AI technology.
However, he sees generative AI becoming a basic element of human life. "As AI agents become mainstream, the demand for AI computing will accelerate," he said. "Countries around the world are recognizing AI as essential infrastructure -- just like electricity and the internet -- and Nvidia stands at the center of this profound transformation."
100x in 10 years?
To turn $10,000 into $1 million, Nvidia stock would need to increase a hundredfold, or 10,000%. Over the past 10 years, Nvidia stock has increased by more than 24,000%, and an initial $10,000 investment would now be worth over $2.4 million. Can Nvidia stock achieve that again over the next 10 years?
Sadly, the answer is almost definitely no. Nvidia has $148 billion in trailing 12-month sales. Last year, revenue increased 114%, but it's already slowing down. It's simply much, much harder to report that kind of increase as the base gets bigger. That's why companies like Walmart and Amazon, the two largest in the U.S. by sales, report much lower sales growth (5.1% and 11% respectively last year), even though they're top companies.
If we imagine that sales grow at a compound annual growth rate (CAGR) of 30% over the next 10 years, sales would reach $1.8 trillion, which seems highly unlikely. It's more likely that as the base grows, the rate will slow. If it grows at a CAGR of 20% over the next 10 years, which is also improbable, it would reach $800 billion in sales, which might be more reasonable in 10 years' time. Keeping its current price-to-sales ratio of 26 constant would lead to a market cap of more than $20 trillion, which even in 10 years doesn't seem likely. But even if it were, it would be only about 7 times the current market cap, not 100. A lower price-to-sales ratio would mean a lower market cap, making it even less likely for your investment to increase a hundredfold.
That doesn't mean you shouldn't invest in Nvidia today. It has massive growth opportunities as the top name in its industry. But keep your expectations in check, and don't expect Nvidia to repeat its explosive performance in the next decade.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
