This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) stocks have been in fine form on the stock market in 2025, and this is evident from the healthy gains of 21% clocked by the tech-laden Nasdaq Composite index so far this year.

AI stocks such as Nvidia, Broadcom, AMD, Palantir, and others have delivered outstanding gains to investors in 2025. However, not all companies benefiting from the AI revolution have turned out to be great investments. Meta Platforms (NASDAQ: META) is one such name.

The "Magnificent Seven" stock is up just 4% this year, and that's because it has witnessed a sharp pullback of late. The stock fell substantially after releasing its third-quarter results on Oct. 29. A massive noncash tax charge that led the company to miss Wall Street's earnings estimates, and Meta's decision to boost capital spending to fund its AI initiatives have been weighing on its shares of late.

However, it won't be surprising to see this tech giant regain its mojo and deliver stronger gains than some of the more popular AI stocks that have outperformed it this year. Let's see why that may be the case. 

Meta Platforms' AI efforts are paying off

Meta Platforms reported an impressive year-over-year increase of 26% in Q3 revenue to $51.2 billion. The company's non-GAAP earnings would have landed at $6.73 per share as compared to the year-ago period's reading of $6.03 per share had it not been for the $15.9 billion non-cash income tax charge related to the implementation of the "big, beautiful bill."

Importantly, Meta management believes that it will "recognize significant cash tax savings for the remainder of the current year and future years under the new law." What's worth noting is that Meta's earnings would have increased by double digits (excluding the impact of the tax charge). That's impressive considering that its costs and expenses increased by 32% year over year in Q3, exceeding its revenue growth.

AI is a key reason why Meta's bottom line is increasing at a healthy pace despite the higher spending. The company's AI-driven content recommendations are leading to higher engagement on its social media properties. Specifically, Meta saw a 5% jump in the time spent on Facebook last quarter, along with a 10% jump in time spent on Threads.

This higher engagement combined with Meta's AI-powered ad tools is contributing to an increase in ad impressions delivered, as well as an increase in the average price per ad. Meta's ad impressions across its family of apps increased by 14% year over year in Q3. Additionally, the average price per ad jumped by 10%.

It is easy to see why that's the case. Meta's AI advertisement solutions are delivering a 22% increase in return on ad spend as compared to non-AI ad tools. The company points out that "for every dollar U.S. advertisers spend with Meta, they see a $4.52 return when they use our new AI-driven advertising tools."

Not surprisingly, Meta says that it has already achieved an annual revenue run rate of over $60 billion for its end-to-end AI-equipped advertising tools. That suggests Meta generated $15 billion in revenue last quarter from its AI-powered ad tools. This puts the company on track to corner a sizable chunk of the $107 billion revenue opportunity that the adoption of AI tools within the marketing space is expected to create by 2028.

Given that Meta is on track to end 2025 with $198.5 billion in revenue, the AI-related opportunity within advertising should eventually allow the company to deliver solid incremental growth over the next three years.

But what about the expenses?

Meta is going all out to build more AI-equipped tools. This explains why the company is now on track to reach $71 billion in capital expenses this year as compared to its earlier expectation of $69 billion. That's a big jump over the $39.2 billion that Meta spent in 2024. What's more, the company points out that its expenses will grow at a faster rate in 2026.

This is a key reason why Meta stock has struggled of late, as investors are probably questioning the rationale behind the heavy AI-related spend the tech giant is incurring. But the good part is that AI is indeed driving tangible growth for Meta, as we saw in the discussion above. That's why it makes sense for the company to continue investing more in AI infrastructure and talent.

This probably explains why analysts have raised their revenue forecasts for Meta.

META Revenue Estimates for Current Fiscal Year data by YCharts

Even better, investors are now getting a good deal on this stock. It is trading at 8.3 times sales, which is lower than the U.S. technology sector's average price-to-sales ratio of 9.1. Assuming Meta hits $271 billion in sales at the end of 2027 and trades in line with the tech sector's average, its market cap could jump to $2.46 trillion.

That suggests a potential jump of nearly 60% from its current market cap. However, the fast-growing adoption of AI tools in the ad space and the head start that Meta has over here suggest that it could end up delivering faster growth, and that could set the stock up for bigger gains. That's why it would be wise for investors to buy this underperforming tech stock before it steps on the gas.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: This AI stock could quietly outperform Wall Street favorites appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Why ASX investors dumped IVV ETF last month
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Meta Platforms, Nvidia, and Palantir Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia will release its quarterly results after the market closes on Aug. 27.

• The chip giant is likely to exceed analysts' expectations thanks to recent developments.

• Nvidia could end up delivering solid guidance as well, and that could give the stock's rally a nice shot in the arm.

Nvidia (NASDAQ: NVDA) stock made a remarkable recovery on the stock market since hitting its 52-week low on April 7, rising an incredible 83% in such a short period. The good part is that the technology giant's parabolic run is likely to continue after Aug. 27, when it it releases its fiscal 2026 second-quarter results (for the three months ended July 27).

Let's look at the reasons that could give Nvidia's stunning rally a shot in the arm after it releases its quarterly results later this month.

These developments suggest that Nvidia could deliver stronger-than-expected results

When Nvidia released its fiscal Q1 results almost three months ago, the company called for $45 billion in revenue for the recently concluded quarter. That would translate into a 50% jump from the year-ago period. However, management remarked that its guidance "reflects a loss in H20 revenue of approximately $8 billion due to the recent export control limitations."

The H20 is a China-specific artificial intelligence (AI) data center graphics processing unit (GPU) that was developed by Nvidia to remain in line with the export restrictions imposed by the U.S. on shipments of its chips to China. However, the U.S. government told Nvidia in April that it needs a license to ship its H20 chips to China.

As a result, Nvidia lost $2.5 billion worth of sales in fiscal Q1, apart from incurring a $4.5 billion charge owing to the restrictions. The U.S. government has now granted Nvidia the license to export its H20 chips to China on the condition that the company will have to share 15% of its revenue from the sales of this chip with the government.

Given that Nvidia was expecting to sell $8 billion of chips to Chinese customers in fiscal Q2, there is a good chance that it may have been able to recoup some of that lost revenue. As a result, Nvidia's guidance for the current quarter could exceed expectations. Its results for the previous quarter could also be better than expected considering the company started applying for export licenses on July 15, a couple of weeks before the quarter ended.

Of course, there are reports suggesting that Nvidia is facing security-related concerns in China, but investors should note that the shortage of AI-focused GPUs in that market could ensure that the H20 remains in good demand.

Moreover, Nvidia is likely to benefit from the stronger-than-expected investments by major cloud computing companies in the U.S. The likes of Amazon, Microsoft, Meta Platforms, and Alphabet are on track to spend $364 billion in capital expenditures in 2025, up from the earlier estimate of $325 billion.

That would be an increase of 64% from last year, and an acceleration of 5 percentage points from the capex increase witnessed in 2024. This bodes well for Nvidia, given that it has been maintaining its position as the dominant player in the AI chip market, while rivals such as Advanced Micro Devices are not gaining enough traction yet.

Specifically, Nvidia controls an estimated 80% of the AI chip market. As such, the higher spending by big tech companies in the U.S., the renewed growth potential in China, and Nvidia's role in the growth of sovereign AI infrastructure can help the company deliver solid results and guidance on Aug. 27.

Is the stock still worth buying?

Nvidia stock has shot up at a parabolic pace in the past four months or so. This explains why it is now trading at 58 times earnings, a big premium to the S&P 500 index's earnings multiple of 25. Investors, however, should note that the company's bottom line is expected to jump by 47% year over year in fiscal Q2, which is more than 5 times the average increase the S&P 500 companies are expected to deliver.

So, Nvidia is deserving of its rich valuation thanks to its ability to grow its sales and earnings at a much faster pace than the broader market. That's why investors looking to buy a growth stock can still consider accumulating Nvidia before its upcoming report, as the points discussed above suggest it has the potential to fly higher after Aug. 27.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: Nvidia stock will jump higher after Aug. 27 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Meta Platforms (NASDAQ: META) stock has been rallying impressively of late, gaining more than 32% in the past three months amid the broader rally in technology stocks. As a result, Meta's market cap has jumped to $1.8 trillion as of this writing on July 14, making it the sixth-largest company in the world.

Meta is slated to release its second-quarter results after the market closes on July 31. The company has been able to grow at a faster pace than the digital ad market thanks to the integration of artificial intelligence (AI) tools into its offerings, which could enable it to deliver another solid set of results later this month.

Given that Meta stock is just 11% away from entering the $2 trillion market cap club as I write this, there is a good chance it could achieve that milestone in July, driven by the tech stock rally and a healthy quarterly report.

META data by YCharts. E = earnings reports.

Let's look at the reasons why Meta stock is primed for more upside this month and in the long run.

Meta Platforms can exceed expectations once again

It is worth noting that Meta's earnings have been better than consensus expectations in each of the last four quarters. One reason is the increase in spending across its family of applications by advertisers. In the first quarter, for instance, Meta reported an impressive increase of 10% year over year in the average price per ad.

Ad impressions also increased by 5% from the year-ago period, which means the company is delivering more ads. This combination of higher pricing per ad and an increase in impressions delivered enabled Meta to report a 37% year-over-year increase in its earnings to $6.43 per share in Q1. However, investors should also note that the company has been aggressively increasing its capital expenditures (capex) to bolster its AI infrastructure.

It expects to spend $68 billion on capex in 2025, at the midpoint of its guidance range. That would be a massive increase over its 2024 capex of $39 billion. This explains why analysts are expecting Meta's earnings to increase at a slower year-over-year pace of 13% for the second quarter to $5.84 per share. While the increased investment in AI-focused data center infrastructure is undoubtedly likely to weigh on Meta's bottom line in the short run, the higher returns its AI investments are generating on the advertising front could help it beat the market's bottom-line expectations. And beating expectations often sends a stock up, as investors react with excitement and optimism.

Meta management points out that users are now spending more time on its applications thanks to AI-recommended content. In the six months that ended March 31, Meta saw the time spent on Facebook and Instagram increase by 7% and 6%, respectively. The increase in user engagement tells us why it has been able to serve more ads.

Moreover, the gains advertisers have seen on the dollars they are spending on Meta's applications are also quite solid. A couple of months ago, Meta said it "assessed the impact of [its] new AI-driven advertising tools and found that they drive a 22% improvement in return on ad spend for advertisers. This means that for every dollar U.S. advertisers spend with Meta, they see a $4.52 return when they use [its] new AI-driven advertising tools."

Unsurprisingly, Meta saw a 30% increase in the number of advertisers using its AI tools to create campaigns in the first quarter. So, there is indeed a solid possibility that Meta will clock healthy growth in ads delivered and the average price per ad in Q2, which could pave the way for a better-than-expected jump in its bottom line and help the company cross the $2 trillion milestone. I expect it to hit that market cap before Aug. 1.

The long-term picture is bright as well

Looking ahead, Meta expects that it will allow advertisers to completely automate the creation and execution of ad campaigns by the end of next year. As such, there is a good chance that Meta's earnings growth could accelerate from 2026, following this year's projected increase of 7%. Estimates are shown in the chart below.

META EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

However, there is a strong possibility that Meta's earnings growth will outpace market expectations, thanks to AI. That's why it won't be surprising to see its market cap jumping to higher levels in the long run, as the digital ad market is expected to clock a robust annual growth rate of 15% through 2030, and Meta has the ability to keep growing at a faster pace than the end market.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: This Artificial Intelligence (AI) Stock Could Hit a $2 Trillion Valuation by July 31 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After starting 2025 poorly, shares of Nvidia (NASDAQ: NVDA) have rallied impressively in the past three months. The chipmaker hit a 52-week low on April 7, and it has since shot up a remarkable 69% since then to become the first company in the world to achieve a $4 trillion market capitalization.

Nvidia's recent jump isn't surprising, as the stock's dip earlier in the year didn't seem justified considering the outstanding growth it has been consistently clocking on account of the terrific demand for its artificial intelligence (AI) chips.

Nvidia is trading at a rich valuation once again

Nvidia stock's surge in the past three-odd months has made it expensive. This is evident from the following chart.

NVDA PE Ratio data by YCharts

Investors were getting a great deal on this fast-growing company in early April when its trailing price-to-earnings (P/E) ratio was in the low 30s, well below its five-year average earnings multiple of 70. The forward P/E ratio of less than 25 was even more attractive. The chip giant was trading at a nice discount to the tech-laden Nasdaq-100's average earnings multiple of 32 at that time, and savvy investors who bought the stock then are sitting on impressive gains as of this writing.

The good part is that Nvidia still has the ability to justify its expensive multiples and deliver more gains to investors in the future thanks to the multiple catalysts it is sitting on. From AI chips to accelerated computing to cloud gaming to enterprise software, Nvidia is set to benefit from several multibillion-dollar end markets that could help it keep growing at a solid pace for a long time to come.

Investors would do well to look at the bigger picture

Consensus estimates are projecting a 53% increase in Nvidia's revenue in fiscal 2026 to almost $200 billion. The company's data center business, which produced 88% of its revenue in the previous quarter, is going to account for a huge chunk of its top line in the ongoing fiscal year. Assuming Nvidia's data center business produces 90% of its top line in fiscal 2026, its revenue from this segment would land at $180 billion.

That would be a 56% increase over the previous fiscal year. This robust growth is being driven by the huge demand for Nvidia's AI graphics processing units (GPUs) which are being deployed in data centers for AI model training and inference purposes. Nvidia is expected to remain the biggest player in the AI chip market with an estimated market share of 80% to 85%, according to Bank of America.

Bank of America analyst Vivek Arya  points out that the scale of Nvidia's customer base and its control over the supply chain will ensure that the chipmaker remains the top dog in this lucrative market. That's precisely the reason why Nvidia's data center business still has a lot of room for growth. According toMcKinsey, a whopping $5.2 trillion is expected to be spent on AI data centers by 2030, along with an additional $1.5 trillion on data centers for handling non-AI workloads.

The consulting firm also points out that the largest chunk of this projected investment -- 60% -- will go toward companies that design and manufacture chips and computing hardware. That could put Nvidia's potential data center chip revenue opportunity at a whopping $4 trillion after five years, much more than the revenue that the company is likely to generate in the current fiscal year.

Even if Nvidia loses ground in the data center chip market to its rivals, it can still witness exponential growth in this segment over the next five years that could send its revenue soaring. At the same time, demand for the company's enterprise AI software solutions, which help customers build AI agents and other applications, apart from helping them manage their AI infrastructure to ensure productivity and security, has been growing at a nice clip.

In February 2025, Nvidia management pointed out that its enterprise revenue almost doubled year over year on a quarterly basis as customers are deploying its solutions to fine-tune their AI models and to develop agentic AI applications, among others. The company claims that its generative AI software platform is helping customers to significantly increase accuracy and reduce the response time of their large language models (LLMs).

With the enterprise AI market expected to generate $104 billion in revenue in 2030, it won't be surprising to see this business move the needle in a significant way for the company in the long run.

Investors would do well to look past analysts' estimates and the valuation metrics, as Nvidia seems to be at the beginning of a remarkable growth curve even after the scintillating gains that it has recorded in revenue and earnings in recent years. Nvidia's potential revenue opportunity is massive enough to help it crush the market's expectations, and that could fuel this AI stock's rise to even a $10 trillion valuation in the next five years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia stock a buy now? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Bank of America is an advertising partner of Motley Fool Money. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia has been at the forefront of the artificial intelligence (AI) revolution thanks to its powerful graphics processing units (GPUs), which have allowed companies and governments around the globe to train and deploy AI models and applications.

The semiconductor giant literally kicked off the AI craze with its A100 GPUs, which were used to train ChatGPT. Since then, multiple AI models from several companies have been trained and brought into production with Nvidia's chips. In fact, Nvidia continues to dominate the AI chip market even now, establishing a big lead over its rivals.

Nvidia's AI-fueled growth has powered a massive surge in its stock price in the past three years. The stock remains a solid bet even after its phenomenal run thanks to the huge addressable market it is serving. However, there is another company that has the potential to dominate its industry -- just like Nvidia does -- thanks to AI.

Let's take a closer look at that name and see why it could turn out to be a solid addition to your portfolio.

This tech giant's AI tools are driving solid gains for customers

Nvidia has left little room for other chipmakers to make a dent in the AI chip market. So, investors looking for another company with the ability to become a leading player in its market and deliver healthy stock price upside in the long run should consider Meta Platforms (NASDAQ: META) for their portfolios.

That's because Meta is using AI to corner a bigger share of the lucrative digital advertising market. The social media giant has been able to substantially increase advertisers' returns on ad dollars spent with the help of its AI tools. Last month, Meta pointed out that its AI-focused advertising tools are driving a 22% improvement in returns on ad spending for advertisers.

Every dollar spent by advertisers in the U.S. on the company's AI ad tools is generating an impressive return of $4.52. Not surprisingly, Meta plans to enable advertisers to fully create and optimize ad campaigns with AI by the end of 2026. Such a move means that brands and advertisers won't have to go through agencies to purchase ad inventories and plan their campaigns, as all of this would be handled by AI.

As a result, it won't be surprising to see smaller brands and companies that lack the budgets to hire marketing agencies flocking to use Meta's AI tools to reach their audience. Even bigger brands could directly go to Meta to further enhance their returns on ad dollars spent. All this could pave the way for stronger growth in Meta's revenue and earnings.

The company's top line increased by 16% in the first quarter of 2025, while its adjusted earnings increased at a better pace of 37%. The stronger bottom-line growth can be attributed to a 10% increase in the average price per ad delivered by Meta last quarter. Ad impressions also increased by 5% year over year, indicating that there was an increase in the number of times users viewed ads on its platform.

A big reason why Meta can keep attracting more advertising dollars is because of its massive daily active user base of 3.43 billion across its various apps. With AI helping brands and advertisers improve audience targeting, there is a good chance that it may be able to clock strong growth in the average price per ad and the number of ad impressions it delivers in the future.

This could eventually help Meta Platforms to continue growing at a faster pace than the digital ad market and its peers. According to eMarketer, global digital ad revenue increased by 12% last year and is forecast to jump another 10% this year. Meta's 2024 revenue increased by 22%, and its performance in the first quarter of 2025 suggests that it is on track to outgrow the industry once again.

So, it is evident that AI is helping Meta Platforms become a bigger player in the digital ad market, and management is confident that this could lead to remarkable growth in the long run.

AI could send Meta Platforms' revenue soaring in the long run

Meta is expected to finish 2025 with $187 billion in revenue, according to consensus estimates. AI is expected to contribute $2 billion to $3 billion of that revenue this year, according to the company's internal estimates. But by 2035, Meta sees its AI revenue ranging anywhere between $460 billion and a whopping $1.4 trillion.

While that's a very wide range and an ambitious target, especially at the high end, investors would do well to note that the overall digital ad market is expected to exceed $1.5 trillion in revenue by 2035, according to third-party estimates. So, there is a good chance that Meta could indeed capture a huge share of this lucrative end-market opportunity on offer considering that it has been gaining ground in the digital ad space.

So, investors looking for an AI stock that has the potential to generate Nvidia-like returns in the long run would do well to buy Meta Platforms right away as it is trading at an attractive 27 times earnings, a discount to the tech-laden Nasdaq-100 index's earnings multiple of 30.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: This artificial intelligence (AI) stock could be the next Nvidia — and it's not what you think appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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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. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms and Nvidia. The Motley Fool Australia has recommended Meta Platforms and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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.

The post Prediction: This artificial intelligence (AI) stock will be worth $5 trillion in 3 years appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• 5 ASX ETFs that could supercharge your portfolio
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has gotten into a habit of capitalizing on lucrative growth trends over the years, and it looks like the company is now on its way to making the most of another massive market that's currently in its early phases of growth.

From gaming personal computers (PCs) to cryptocurrency mining to high-performance computing (HPC) and now artificial intelligence (AI), Nvidia has managed to hit gold in multiple end markets that have now helped it become the third-largest company in the world (as of this writing). It looks like the company is going to add the automotive business to that list.

In this article, we will take a closer look at where Nvidia's automotive business is right now and check why it could become the next big growth driver for the company.

Nvidia's automotive business is set to step on the gas

Nvidia finished fiscal 2025 (which ended on Jan. 26) with automotive revenue of $1.7 billion, an increase of just 5% from the previous year. However, this business boomed significantly in the final quarter of the year, with revenue more than doubling from the year-ago quarter.

Looking ahead, Nvidia is expecting its automotive revenue to grow to $5 billion in fiscal 2026. That would be a jump of nearly 3x from the previous fiscal year. The reason why Nvidia is confident of achieving such impressive growth in its automotive business this year is because of the fast-improving demand for the company's solutions by major automakers and component suppliers.

Earlier this year, the company announced a partnership with Toyota, pointing out that the world's largest automaker will "build its next-generation vehicles on Nvidia Orin running the safety-certified Nvidia DriveOS." Meanwhile, self-driving technology company Aurora and German automotive component giant Continental will also be deploying the company's DRIVE Thor computer system for launching driverless trucks.

Importantly, this isn't the only place where Nvidia is winning in the automotive segment. Hyundai has selected Nvidia's solutions for developing autonomous driving systems in simulated environments. Additionally, the Korean automotive giant is also going to use Nvidia's Omniverse digital twin platform for designing products and creating prototypes. Hyundai also plans to use Omniverse for optimizing its existing and upcoming manufacturing facilities to "improve production quality, streamline costs, and enhance overall manufacturing efficiencies."

And now, automotive giant General Motors has announced a partnership with Nvidia to optimize its factory planning. GM will also use Nvidia's Drive platform to develop advanced driver assistance systems (ADAS) along with improving the safety of its vehicles. Nvidia's Blackwell-based Drive AGX system has also been selected by automotive components giant Magna International to integrate AI capabilities into vehicles.

These partnerships demonstrate that automakers and component suppliers are increasingly turning to Nvidia to develop next-generation vehicle technologies and fine-tune their factory operations with digital twins. At its investor day held in 2022, Nvidia pointed out that it sees a massive addressable opportunity worth $300 billion in the automotive space. For perspective, that's higher than the $100 billion opportunity it saw in gaming at that time and equal to the $300 billion revenue opportunity it outlined for its graphics cards and chip systems.

The new partnerships Nvidia has announced of late have put the company well on its way to realizing the lucrative automotive opportunity, which is why the company expects its revenue from this segment to triple this year. As such, it won't be surprising to see the automotive business becoming the next big pillar of Nvidia's growth in the long run, as the world's leading companies are now using its technology.

More reasons to buy the stock

There was a time when gaming was Nvidia's biggest source of revenue. Then came data centers and AI, and this discussion suggests that automotive could become the next big play for the company. Investors, however, will do well to note that AI is likely to remain a top growth driver for Nvidia for a long time to come.

The company dominates the market for data center graphics cards, putting it in a terrific position to capitalize on secular growth trends such as accelerated computing and AI inference. Moreover, it is making a dent in the enterprise AI software market as well. All this explains why analysts have continued raising their earnings growth expectations from this semiconductor giant over the past few months.

NVDA EPS Estimates for Current Fiscal Year data by YCharts

So, the arrival of additional catalysts should ideally help Nvidia sustain strong levels of bottom-line growth in the long run, which is why buying this tech stock right now could turn out to be a smart move, since it trades at an attractive 26 times forward earnings.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 300 billion reasons to buy Nvidia before this budding business becomes a giant appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• 5 ASX ETFs that could supercharge your portfolio
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• 3 fantastic ASX ETFs to buy this month
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended General Motors and Magna International. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has been a huge winner on the stock market in the past decade, turning an investment of just $100 into nearly $25,000 as of this writing on account of the outstanding revenue and earnings growth it has delivered during this period.

The graphics card specialist has benefitted from multiple growth trends during this period, such as the growth of the video gaming market, the advent of connected cars and autonomous driving technology, high-performance computing, and artificial intelligence (AI). However, Nvidia's remarkable surge in the past 10 years has made it the second-most valuable company in the world with a market cap of $3.22 trillion.

Investors, therefore, may be wondering if Nvidia has the ability to deliver substantial gains over the next decade as well, considering where it is now. Let's take a closer look at Nvidia's potential catalysts for the next decade and try to find out if it is worth buying the stock now in anticipation of more upside in the long run.

Nvidia still has a lot of room for growth over the next decade

Expecting Nvidia to replicate the gains it has clocked in the past decade over the next 10 years as well looks outlandish. A 250x jump in the stock price in the next decade would take its market cap to a whopping $850 trillion, and that isn't logical, as the global economy is expected to hit an estimated $155 trillion in 2035.

However, Nvidia can still deliver respectable gains in the coming decade thanks to the sizable end markets the company is likely to benefit from. For instance, the shift toward accelerated computing in data centres in order to speed up tasks and reduce power consumption and operating costs is expected to open a $1 trillion revenue opportunity for Nvidia, according to CEO Jensen Huang.

That level of investment may look like a lot initially, but it does seem possible considering that $2.6 trillion was spent on constructing data centres between 2017 and 2024. Those data centres are now in need of upgrades to tackle intensive workloads such as AI. As a result, data centre workloads are likely to be shifted from central processing units (CPUs) to graphics processing units (GPUs) to extend the life of their server infrastructure.

That's because the parallel computing power of GPUs will allow them to tackle intensive workloads while offloading less intensive tasks to CPUs. This is likely to reduce the stress on the system as GPUs are designed to accomplish bigger calculations in a shorter time span, leading to reduced energy consumption and higher efficiency. Moreover, the reduced stress on CPUs means that they will experience lower wear and tear, thereby extending the life and computational power of data centres at the same time.

This massive opportunity in accelerated computing is going to be a huge tailwind for Nvidia's data centre business, which has generated $98 billion in revenue in the past four quarters. Given that Nvidia controls an estimated 85% of the data centre GPU market, it is in a solid position to make the most of this potentially huge market. Even if Nvidia loses ground to competitors and controls half of the data centre GPU market after a decade, its data centre revenue could jump by 5x based on the company's $1 trillion estimate.

But then, Nvidia's competitors are nowhere near matching its technological advantage and control over the chip fabrication supply chain. That's why Nvidia's data centre revenue could record stunning growth over the next decade. But this isn't the only big opportunity the semiconductor giant could take advantage of through 2035.

The cloud gaming market, for example, presents another huge growth opportunity for Nvidia. Roots Analysis predicts that the cloud gaming market, which was worth less than $5 billion in 2024, could generate a whopping $237 billion after a decade. That won't be surprising as cloud gaming allows gamers to play the latest games without having to invest in expensive hardware, and all they need is a fast internet connection.

Nvidia has already built a solid position for itself in the cloud gaming space, indicating that this could be yet another huge multibillion-dollar opportunity that could help the company sustain healthy levels of growth over the next decade. Throw in the possibility that Nvidia's overall addressable revenue opportunity is close to $2 trillion, and there is a strong possibility that its top line could jump significantly higher in the next 10 years from the estimated $129 billion in the latest fiscal year.

An attractive valuation makes Nvidia stock worth buying and holding

Nvidia is trading at 32 times forward earnings, which is lower than its five-year average forward earnings multiple of 40. Buying Nvidia at this level and holding it for the next decade could be a smart move considering the company's massive addressable revenue opportunity that could send its earnings higher in the long run.

Additionally, Nvidia's price/earnings-to-growth ratio (PEG ratio) of 1, based on the company's expected earnings growth for the next five years as per Yahoo! Finance, suggests that it is fairly valued right now with respect to the growth that it is expected to deliver. So, even though Nvidia's rise in the coming decade may not be as big as what we have seen in the past, this tech stock could still make for a good addition to a diversified portfolio considering its lucrative catalysts.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where might Nvidia stock be in 10 years? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• 5 ASX ETFs that could supercharge your portfolio
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• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has gotten off to a bad start on the stock market in 2025, losing almost 7% of its value as of this writing, with Chinese artificial intelligence (AI) start-up DeepSeek's launch of a low-cost but capable AI model playing a key role in the semiconductor giant's troubles.

When DeepSeek claimed that it spent just $6 million to train its R1 reasoning model that's capable of competing with OpenAI's o1 reasoning model, AI stocks in the U.S. took a big beating. Nvidia stock was one of the biggest victims of the sell-off, dropping 17% on January 27 after it emerged that DeepSeek overtook ChatGPT's downloads on the Apple app store in the U.S.

DeepSeek's low-cost model sparked concerns about major cloud computing companies and governments reducing their demand for the AI chips Nvidia sells. However, a closer look at recent developments in the AI space suggests that the spending on AI chips could continue to head higher, opening the possibility of Nvidia stock regaining its mojo once it releases its fiscal 2025 fourth-quarter results on February 26.

Let's look at why Nvidia could offer a bright update about the state of AI spending later this month along with its quarterly report.

Nvidia could win big from this project thanks to its solid share of AI chips

Over the last few years, tech giants and governments around the world have poured a lot of money into the development of AI infrastructure, and President Donald Trump gave AI spending prospects a massive boost last month.

On Tuesday, January 21, Trump announced at the White House that SoftBank, OpenAI, and Oracle are forming a joint venture that plans to invest $100 billion in AI infrastructure. The joint venture, known as Stargate, is eventually planning to spend up to a whopping $500 billion on building AI infrastructure in the U.S. over the next four years.

Stargate's first AI data center is already under construction in Texas, according to Oracle chairman Larry Ellison. The joint venture is expected to construct 20 data centers, creating an estimated 100,000 jobs.

In a post announcing the Stargate project, OpenAI pointed out that the initial funding will be provided by SoftBank, OpenAI, Oracle, and Abu Dhabi's AI-focused investment company, MGX. The post further highlighted that Nvidia is going to be among the "initial technology partners" in Stargate.

Nvidia has been at the forefront of the AI revolution with its powerful graphics processing units (GPUs) based on the Ampere architecture that helped OpenAI train ChatGPT. It has kept pushing the envelope in the AI accelerator market, churning out more powerful chips in the past three years based on its Hopper and Blackwell architectures.

This explains why Nvidia has maintained a solid grip on the AI chip market with an estimated share of 90%. Given that Nvidia has created a technology advantage over rivals in the AI chip market, it could remain the dominant force in this space. As Nvidia's GPUs are the basic building blocks of AI data centers given their ability to perform massive calculations simultaneously, allowing companies to train and deploy AI models quickly, Stargate's ambitious investment plan should ideally help improve the chipmaker's addressable market.

For instance, Oracle has been relying on Nvidia's GPUs to create AI infrastructure to rent out to customers so that they can train AI models in the cloud. In September last year, Ellison remarked that one of Oracle's largest data centers "is 800 megawatts, and it will contain acres of NVIDIA GP clusters able to train the world's largest AI models." This was followed by a remark from Oracle CEO Safra Catz on the December 2024 earnings conference call that the company "delivered the world's largest and fastest AI supercomputer, scaling up to 65,000 Nvidia H200 GPUs."

Oracle is planning to deploy an additional 35 cloud regions around the globe in addition to the 17 it already has. It won't be surprising to see the company's appetite for Nvidia's GPUs increasing. More importantly, as Nvidia has been working with its supply chain partners to increase the output of its AI GPUs in 2025, it should be in a position to meet the higher demand for its chips that's likely to arise following Stargate.

Meanwhile, the likes of Meta Platforms and Microsoft aren't going to curtail their spending on AI infrastructure following DeepSeek's breakthrough. Both companies believe that heavy AI investments are required to support the growing demand for AI applications, thanks to the potential arrival of more efficient models as demonstrated by DeepSeek. Dutch semiconductor equipment giant ASML suggested something similar after the company witnessed solid growth in orders and received way more bookings than Wall Street was anticipating.

All this suggests that the AI spending environment could remain robust, and that could help Nvidia deliver solid results and guidance later this month.

Stronger-than-expected growth could lead to more upside

Analysts are currently expecting Nvidia's revenue in fiscal 2026 (which has just begun) to increase 52% to just over $196 billion, followed by a 21% increase in fiscal 2027.

NVDA Revenue Estimates for Current Fiscal Year data by YCharts

However, expect to see those estimates head higher in light of the above discussion, paving the way for more upside in Nvidia stock. It is worth noting that Nvidia's 12-month price target of $175, according to 66 analysts covering the stock, points toward 36% gains from current levels.

Nvidia's revenue estimates for both fiscal years 2026 and 2027 have jumped higher of late, a trend that could continue thanks to continued investments in AI. As a result, Nvidia's price target could also witness upward revisions.

So, investors who have been on the sidelines and are wondering if it is a good idea to buy shares of Nvidia following the stellar returns that the stock has delivered in the past couple of years can consider buying it right away as it can regain its mojo. The stock's forward earnings multiple of around 26 is very attractive considering that the tech-laden Nasdaq-100 (NASDAQ: NDX) index has a forward earnings multiple of 27. That's why buying Nvidia right now could turn out to be a smart move as its healthy earnings growth momentum is likely to continue.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: Nvidia stock is going to soar after February 26 appeared first on The Motley Fool Australia.

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Harsh Chauhan has no position in any of the stocks mentioned. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Apple, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended ASML, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock was crushed on Jan. 27, dropping 17% in a single session after a fresh wave of doubts came to the forefront following the cost-effective artificial intelligence (AI) model unveiled by Chinese start-up DeepSeek.

DeepSeek's claim that it trained its R1 model for just $6 million and made it competitive enough to perform as well as the more expensive o1 reasoning model from OpenAI rattled investors. Shares of Nvidia have delivered stellar gains over the past couple of years, as its revenue and earnings have grown remarkably thanks to the booming demand for its expensive graphics cards that are used for training and deploying AI models.

So, DeepSeek's claim of doing more with less has raised fresh concerns about the potential demand for Nvidia's chips in the future. However, this is not the only factor that has been weighing on Nvidia stock of late. The potential restriction on Nvidia's chip exports to international destinations and the relative slowdown in spending on AI infrastructure are also issues (which have now been exacerbated by DeepSeek's breakthrough).

However, pressing the panic button and selling Nvidia on this piece of news may not be a smart move. After all, there are enough tailwinds suggesting that it may be able to regain its mojo once again and even hit the $200 mark.

AI infrastructure spending is set to be massive in 2025

Concerns about a slowdown in AI infrastructure spending seem to have been put to rest based on recent announcements made by the major stakeholders in this space. First, Microsoft announced that it is set to raise its capital expenditure (capex) by 43% in the current fiscal year to $80 billion as it looks to build more AI data centers.

Now, Meta Platforms has also announced that it will increase its 2025 capex by roughly 50% from last year's estimated outlay. The announcements by these tech giants have also been accompanied by a major development at the White House. SoftBank, OpenAI, Oracle, and Abu Dhabi-based AI investment firm MGX have announced that they will "begin deploying $100 billion immediately" for building AI infrastructure in the U.S. as a part of the Stargate Project.

Of course, you may be wondering if the low cost of training DeepSeek's model will lead Nvidia customers to reduce their spending on its chips. It's too early to jump to a conclusion, but there is a possibility that the demand for Nvidia's data center graphics cards won't be dented. That's because the efficiency displayed by DeepSeek could encourage more companies to build cost-efficient AI models, which means that compute demand is likely to remain solid.

So, there is a possibility that AI-focused spending by U.S. tech titans in 2025 could head higher once again. This would pave the way for Nvidia to sustain the outstanding revenue and earnings growth that the company has been clocking over the past couple of years.

NVDA Revenue (TTM) data by YCharts.

A big reason why Nvidia will be the most likely beneficiary of the AI splurge in 2025 is because it continues to dominate the market for data center graphics processing units (GPUs). The company controls an estimated 70% to 95% of the AI data center GPU market per various estimates, though there's a good chance that its share is at the higher end of that range.

That's because rivals such as AMD and Intel have barely managed to make a dent in the AI chip market. AMD is Nvidia's closest competitor in the AI data center GPU market, and its estimated 2024 revenue from sales of these chips is a fraction of Nvidia's potential revenue from this space. Things are even worse at Intel, as the company is expected to fall short of its $500 million AI chip revenue target for 2024.

So, Nvidia is on track to corner most of the incremental spending on AI chips this year. Even better, the doubling of advanced chip packaging capacity by Nvidia's foundry partner Taiwan Semiconductor Manufacturing should ideally allow the former to cater to the terrific demand from the tech giants. As a result, there's a good chance that Nvidia's earnings growth in fiscal 2026 (which will begin shortly and coincide with 11 months of 2025) could be higher than what analysts are expecting.

That could be the reason why this semiconductor stock could jump to $200 this year.

Decoding the path to $200

Nvidia stock needs to jump 55% from current levels to hit $200. Consensus estimates are projecting a 50% increase in Nvidia's earnings in fiscal 2026 to $4.45 per share. The Street-high estimate points toward a 101% jump in its bottom line.

However, Nvidia can beat the average earnings growth estimate for the new fiscal year on the back of incremental spending on AI infrastructure and the capacity improvements by TSMC. Assuming it achieves a 75% jump in its bottom line, Nvidia could report earnings of $5.16 per share in fiscal 2026. Applying a forward earnings multiple of 40 (in line with the company's five-year average forward earnings multiple) to the projected earnings for the fiscal year would be enough to help Nvidia stock hit $200.

What's more, the forward earnings multiple of 40 assumed above is lower than the stock's trailing earnings multiple. So, this AI stock could deliver healthy gains even if it trades at a discount going forward.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Can Nvidia stock still hit $200 in 2025? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• 5 ASX ETFs that could supercharge your portfolio
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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. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, Meta Platforms, Microsoft, Nvidia, Oracle, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Advanced Micro Devices, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) and Microsoft (NASDAQ: MSFT) are pioneers in artificial intelligence (AI) as both companies have played central roles in bringing this technology mainstream.

While Microsoft-backed OpenAI kicked off the AI craze when it launched the highly popular ChatGPT in November 2022, the chatbot may not have seen the light of the day without Nvidia's graphics processing units (GPUs), which were used for training the large language model (LLM) powering ChatGPT. As other major tech giants joined the AI race, the demand for Nvidia's chips went through the roof, and sent its revenue and bottom line soaring.

Meanwhile, the impact of AI on Microsoft's business has been gradual. The company is spending billions to build its AI data centre infrastructure -- benefitting Nvidia in the process -- and believes its AI-focused investments will "support monetization over the next 15 years and beyond." This explains why Nvidia stock has outperformed Microsoft's by a massive margin in the past couple of years.

NVDA data by YCharts.

But will Nvidia continue to outperform Microsoft in 2025? Let's find out.

Microsoft's AI-driven growth should gain momentum, while Nvidia faces challenges

As already mentioned, Microsoft is benefitting gradually from AI. The company's revenue in fiscal year 2024 (that ended June 30) was up 16% from the previous year to $245 billion. Its adjusted earnings increased 20% year over year to $11.80 per share. The company's estimated revenue growth rate of 14% for fiscal 2025 to $278.6 billion isn't all that great, while its earnings are expected to increase by 10.5% to $13.04 per share.

The forecasts for fiscal 2026, which will begin in July 2025, don't point toward a major improvement either. Consensus estimates are projecting a 14% increase in Microsoft's revenue in the next fiscal year, along with a 15% jump in earnings.

MSFT Revenue Estimates for Next Fiscal Year data by YCharts.

Nvidia, on the other hand, is expected to finish the current fiscal year (ending January 2025) with outstanding revenue growth of 112% to $129 billion, followed by a 52% increase in the next fiscal year to $196 billion. Nvidia's bottom line is also expected to jump an impressive 128% in the ongoing fiscal year followed by a 50% jump in the next one.

All this indicates that Nvidia could continue to grow at a much faster pace than Microsoft over the course of the next year. What's more, the 12-month median price targets of both companies suggest that Nvidia stock could rise 33% while Microsoft is expected to deliver 20% gains. So, the odds seem in favour of Nvidia outperforming Microsoft in 2025, and that's not surprising considering that the chipmaker continues to witness outstanding demand for its AI data centre GPUs.

However, investors would do well to note that a few concerns could weigh on Nvidia stock. From potential restrictions that could be imposed on sales of its AI chips to foreign countries to an expensive valuation to the efforts being undertaken by major Nvidia customers to reduce their reliance on its chips, there are multiple reasons why Nvidia shares may remain under pressure.

Moreover, the company's growth rate -- though still impressive -- is gradually slowing down. These are the reasons why Nvidia stock may lose its shine in 2025. Microsoft, on the other hand, is slowly but steadily stepping up its game in key AI-focused niches that could set it up for outstanding growth in the long run.

The tech giant is already gaining share in the cloud computing market thanks to AI. Microsoft's Azure cloud and other services revenue increased by 33% in the first quarter of fiscal 2025, with AI contributing 12 percentage points of that growth. More importantly, AI is helping Microsoft build a solid revenue pipeline by driving an increase in the number of big contracts that the company is signing for its Azure cloud solutions.

This is evident from the 22% increase in Microsoft's commercial remaining performance obligations (RPO) in fiscal Q1 2025 to $259 billion. The faster growth in RPO as compared to the revenue bodes well for Microsoft, as this metric refers to the total value of a company's unfulfilled contracts. Microsoft expects to recognise 40% of its RPO as revenue in the next 12 months, which would be an increase of 17% on a year-over-year basis.

As a result, the possibility of Microsoft growing at a faster pace than Wall Street's expectations in the coming year cannot be ruled out. A similar story could unfold at Nvidia, and the company could overcome the adversity that it is facing right now.

Though the outgoing administration's potential curbs on Nvidia chip exports could pose a threat to its remarkable revenue growth -- 56% of its revenue is from customers outside the U.S. -- investors should note the rules will be enforced 120 days from now, giving the incoming administration time to weigh in on the new rules.

Looking at the positive side of things, Nvidia's focus on significantly enhancing the production capacity of its latest Blackwell AI processors to meet the red-hot demand from its customers, along with the massive increase in AI infrastructure spend by its U.S. customers, could be enough to help the company grow at an impressive pace once again in 2025. As such, the possibility of Nvidia stock retaining its mojo despite the potential challenges it faces cannot be ruled out.

What should investors do?

The uncertainties surrounding Nvidia may tempt investors to put their money into Microsoft stock to capitalise on the AI boom, especially considering the latter's valuation. After all, Microsoft is trading at a much cheaper 34 times earnings as compared to Nvidia's earnings multiple of 52.

However, Nvidia's forward earnings multiple of 31 is in line with Microsoft's, and that's not surprising considering the outstanding growth that the company is expected to deliver. This makes Nvidia an attractive AI stock to buy right now, and investors can consider using the negative press surrounding it as a buying opportunity considering that its huge addressable market could be enough to help it overcome any potential regulatory challenges.

But at the same time, even Microsoft looks like a top AI stock to buy for the long run considering the massive opportunities in cloud computing and workplace collaboration that could supercharge its growth.

So, investors can consider buying any one of these two AI stocks right now depending on their risk appetite, and there is a good chance that they may not go wrong in 2025, as well as in the long run, as both Microsoft and Nvidia are sitting on lucrative end markets thanks to AI.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better artificial intelligence (AI) stock for 2025: Nvidia vs. Microsoft appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Microsoft and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) has been the driving force behind Nvidia (NASDAQ: NVDA) stock's impressive rise over the past couple of years, as major cloud service providers and governments have been rushing to get their hands on the company's chips to train large language models (LLMs) so they can launch AI services for customers.

AI has had such a huge impact on Nvidia's business that the company now gets 88% of its total revenue from this segment. Gaming, once Nvidia's bread and butter, now accounts for just over 9% of its top line. That's why it is not surprising to see why analysts and investors take a keen interest in Nvidia's data centre business, as this segment now plays a critical role in deciding the direction the stock will take on the market.

However, savvy investors shouldn't miss out on the long-term growth opportunities that Nvidia could take advantage of either. Of course, the data centre business is the biggest growth driver for Nvidia right now, but there is another segment that could contribute impressively to its growth in the coming years. Let's take a closer look at that opportunity.

Nvidia has set its sights on this potentially massive growth opportunity

At the CES 2025 trade show, Nvidia announced it is widening the reach of its GeForce Now cloud-gaming platform. The company points out that GeForce Now can turn "any device into a GeForce RTX gaming PC," and gamers will be able to access this service from the Steam Deck handheld gaming console, as well as virtual and mixed-reality headsets from the likes of Apple, Meta Platforms, and ByteDance.

Nvidia will also launch a GeForce RTX data centre in India in the first half of 2025. It is worth noting that the company launched such data centres in Japan, Colombia, and Chile last year. So, Nvidia's cloud-gaming service could witness a robust increase in adoption this year thanks to its availability on more devices and in more regions across the globe.

Nvidia's GeForce Now expansion is coming at a good time thanks to the growing spending on cloud gaming. Financial advisory and consulting firm Alix Partners estimates that consumers are likely to spend more money on streaming games from the cloud rather than investing in gaming consoles and personal computers (PCs).

The firm points out that the availability of AAA games -- which are high-quality video games published by major studios -- on mobile devices along with the availability of fast internet connections and cloud infrastructure that supports such games will boost the adoption of cloud gaming. Additionally, cloud gaming doesn't require expensive hardware such as graphics cards or consoles as the games run on remote servers and are delivered to devices through the internet.

Gamers simply have to subscribe to a service such as GeForce Now, and they can play high-quality games on their existing device without having to invest in dedicated hardware. These are the reasons why Alix Partners is forecasting the cloud-gaming market to generate $11.1 billion in revenue in 2025, which would be a 58% increase over last year. That would be faster than the 40% growth the market reported in 2024.

By 2030, annual spending on cloud gaming is expected to reach almost $64 billion. The market is expected to keep growing at a terrific pace even after that, hitting an estimated $140 billion in 2032. This massive end-market opportunity explains why it makes sense for Nvidia to ramp up its presence in this space.

Nvidia could be on its way to becoming a major cloud-gaming player

Though Nvidia doesn't spell out how much revenue it gets from GeForce Now or the number of users the service currently has, past data indicates that its cloud-gaming platform has witnessed rapid adoption. In August 2022, Nvidia CFO Colette Kress remarked that GeForce Now has more than 20 million registered users. That was a big improvement from February 2020 when the service had 1 million users.

Video game analytics provider Newzoo pointed out in 2022 that a total of 31.7 million users were paying for cloud-gaming services. Nvidia, therefore, was already a solid player in this nascent market at that time. That doesn't come across as a surprise since Nvidia has been the dominant force in the market for gaming graphics cards over the years thanks to its technological lead over AMD, a trend that continues to this day as it controlled 90% of this space in the third quarter of 2024.

The company now offers access to more than 2,100 gaming titles to customers on GeForce Now, a number that's likely to continue expanding. Gamers can join Nvidia's cloud-gaming platform for free to access this huge gaming library, though they will be restricted to long queue times and one-hour gaming sessions. On the other hand, the membership plan priced at $9.99 a month will give gamers a six-hour gaming session and shorter queue times.

The highest-priced membership tier of $19.99 a month comes with more bells and whistles, such as 4K gaming, higher frames per second for a better gaming experience, and longer sessions of 8 hours. That's because members using this plan will have games streamed to their devices from data centres powered by Nvidia's flagship RTX 4080 gaming GPU (graphics processing unit).

Another reason why Nvidia's cloud-gaming offering is likely to take off in the long run is because its most expensive subscription plan is cheaper than buying AAA gaming titles such as Call of Duty: Black Ops 6 that's priced at $69.99 on PC. So, the lower cost of gaming from both the hardware and software perspective should be a tailwind for both the cloud-gaming market and Nvidia, which already seems to be building a nice position for itself in this niche that should help it corner a big chunk of this multibillion-dollar market in the long run.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's next multibillion-dollar opportunity is hiding in plain sight appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock has made investors significantly richer in the past three years, turning an investment of $1,000 into more than $4,500 as of this writing. This is thanks to the 354% jump in the company's shares during this period, on account of its dominant position in the lucrative market for artificial intelligence (AI) chips.

It is worth noting that shares of the chipmaker have handsomely outperformed the Nasdaq Composite's (NASDAQ: .IXIC) gains of 23% in the past three years. Nvidia's outstanding stock market returns have been powered by the terrific growth in its revenue and earnings, as customers and governments have been lining up to get their hands on its AI chips to train and deploy AI models.

Now that we are at the beginning of 2025, it would be a good time to take a closer look at Nvidia's prospects for the next three years and see if this high-flying AI stock can continue delivering more upside to investors in the future as well.

Nvidia's massive addressable opportunity suggests it isn't done growing yet

The size of Nvidia's business has grown immensely over the past three years. The company is on track to finish fiscal 2025 (which will end this month) with revenue of $128.6 billion (calculated by adding its fiscal Q4 revenue forecast of $37.5 billion to the $91.1 billion revenue it has generated in the first nine months of the year).

For comparison, Nvidia ended fiscal year 2022 (which coincided with the majority of 2021) with $26.9 billion in revenue. So, the chipmaker's revenue is on track to increase at a compound annual growth rate (CAGR) of 68% during this three-year period. Investors may be wondering if Nvidia is capable of replicating such stunning revenue growth over the next three years as well.

A 68% CAGR over the next three years would bring Nvidia's top line to almost $610 billion by the end of fiscal 2028. While that figure may seem extremely ambitious at first, investors should note that Nvidia has a huge addressable market opportunity that could indeed allow it to get closer to that figure. For instance, the company sees a $1 trillion revenue opportunity in the data center market alone.

CEO Jensen Huang points out that "every single data center will have GPUs" in the future to enable accelerated computing, which is done through specialised hardware such as graphics cards that Nvidia sells to perform more work in less time. As a result, accelerated computing enables users to get more done while consuming less energy, which is why it is expected to play a central role in keeping data center power consumption in check in the long run.

Moreover, the construction of new data center capacity is going to be another long-term tailwind for Nvidia. McKinsey, for example, estimates that global data center capacity could jump at an annual rate of 19% to 22% through 2030 to support the booming demand for generative AI. All this indicates that Nvidia's data center business still has a lot of room for growth, considering that the company is on track to end fiscal 2025 with just under $100 billion in revenue from this segment.

The $1 trillion opportunity suggested by Nvidia indicates that it has scratched just 10% of the opportunity on offer in this space. Moreover, the company is the leading player in the data center GPU market, with a market share of more than 85%, indicating that the growing adoption of accelerated computing could significantly lift Nvidia's data center revenue over the next three years.

The good part is that Nvidia's growth opportunity isn't limited to just data centers. The company's GPUs are also being used for other purposes as well, such as creating digital twins for industrial applications, powering gaming and AI personal computers (PCs), and in automotive and robotics. Nvidia reported robust growth in these three segments last quarter, generating combined revenue of $4.2 billion. That was a 20% jump over the prior-year period.

These segments should continue to be tailwinds for Nvidia. The gaming GPU market, for instance, is expected to add $49 billion in revenue between 2023 and 2028, growing at a CAGR of 21% during this period, as per TechNavio. Nvidia is the top player in gaming GPUs, with a market share of 90%, according to Jon Peddie Research. This puts the company in a nice position to make the most of the incremental growth opportunity in this space.

Meanwhile, the digital twin market is expected to generate $110 billion in revenue in 2028, as compared to $10 billion in 2023. Nvidia's GPUs support the growth of this market, as they are used for creating virtual models of factories and also for automating workflows in factories to enable higher operating efficiency. Multiple companies such as Foxconn, Reliance, Toyota, and others are using digital twins in their business operations by deploying Nvidia's GPUs.

All this indicates that Nvidia's multiple growth drivers could indeed help it sustain its impressive growth over the next three years.

How much upside can investors expect?

We have seen that Nvidia is indeed capable of sustaining its outstanding revenue growth rate over the next three years. However, to estimate the stock's potential upside, we are going to rely on consensus estimates from YCharts. As the chart shows us, Nvidia's earnings are expected to grow from $2.95 per share in fiscal 2025 to $5.59 in fiscal 2027. That points toward an annual earnings growth rate of 37% for the next two years.

NVDA EPS Estimates for Current Fiscal Year data by YCharts

If we take a conservative view and estimate that Nvidia's earnings grow even 30% in fiscal 2028, its bottom line could hit $7.27 per share. If we multiply the projected earnings after three years with the Nasdaq-100's earnings multiple of 33 (using the index as a proxy for tech stocks), its stock price could hit $240.

That points toward around 66% gains from current levels over the next three years. Given that Nvidia is trading at around 32 times forward earnings right now, investors are getting a good deal on this AI stock, indicating that they can still consider buying it, as it seems to have room for more upside going forward.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where will Nvidia stock be in 3 years? appeared first on The Motley Fool Australia.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The red-hot rally that started in shares of Nvidia (NASDAQ: NVDA) toward the end of 2022 is now almost two years old, and the chip giant has delivered 11x gains during this two-year period.

So, an investment of just $100 made in Nvidia stock a couple of years ago is now worth more than $1,100. More importantly, it appears that the company's phenomenal run could be sustainable in 2025 as well, thanks to the developments in the artificial intelligence (AI) chip market.

Here, we will take a closer look at the reasons why Nvidia's stunning run may continue next year.

Strong Blackwell demand and improving supply will be tailwinds for Nvidia next year

Consensus estimates forecast Nvidia to end the ongoing fiscal year 2025 with $125.5 billion in revenue, which would be a 125% increase from the previous year. However, analysts at KeyBanc are forecasting the company's revenue to come in at $130.6 billion in the current fiscal year (which will end in January 2025).

KeyBanc points out that Nvidia is on track to deliver stronger growth this year thanks to the sales ramp of its new Blackwell AI processors. That's not surprising, as Nvidia management pointed out on the recent earnings conference call that it expects "to get several billion dollars in Blackwell revenue" in the fourth quarter of fiscal 2025.

At the same time, Nvidia believes that the sales of its current-generation Hopper chips, the H100 and H200 processors, are on track to increase in the second half of fiscal 2025 on the back of strong demand and improved supply. KeyBanc analysts also point out that the demand for these Hopper chips is extremely strong.

Even better, Nvidia's suppliers are taking steps to ensure that the chip giant is able to fulfill more orders. For instance, contract electronics manufacturer Foxconn has announced that it is building the world's largest production facility for Nvidia's GB200 Grace Blackwell Superchip. This particular chip consists of two of Nvidia's B200 Tensor Core GPUs (graphics processing units) that are connected to its Grace CPU (central processing unit).

Each Nvidia GB200 Superchip is expected to be priced between $60,000 to $70,000. More importantly, the server systems manufactured using multiple GB200 Superchips are in robust demand. Nvidia reportedly increased its orders for the Blackwell GPUs by 25% in July this year, and Foxconn's announcement suggests that demand remains robust.

Market research firm TrendForce estimates that Nvidia could ship 60,000 units of GB200 NVL36 servers next year, and this particular configuration reportedly commands an average selling price of $1.8 million. What that means is that Nvidia may be able to sell $108 billion worth of its GB200 NVL36 servers next year.

Meanwhile, Japanese investment bank Mizuho is forecasting sales of 6.5 million to 7 million units of Nvidia's AI graphics cards next year, suggesting that the company could pull in close to $200 billion in data center revenue in calendar 2025 (which will coincide with the majority of its fiscal 2026). If that indeed happens, Nvidia could be well on its way to smashing analysts' revenue expectations for the next fiscal year.

The stock seems built for more upside in 2025

As the chart shows us, analysts are expecting Nvidia to clock $177 billion in revenue in fiscal 2026.

NVDA Revenue Estimates for Current Fiscal Year data by YCharts

The estimate has moved substantially higher as the year has progressed. So, there is a good chance that it could indeed breach the $200 billion mark going forward, considering the potential revenue that Nvidia is expected to generate from sales of its data center chips alone. That healthy jump in Nvidia's revenue is set to translate into impressive earnings growth as well.

Analysts are expecting Nvidia to post $4.02 in earnings in fiscal 2026, up 41% from this year's projected earnings of $2.84 per share. However, next year's earnings estimate has moved up significantly in the past 90 days. Three months ago, consensus estimates were projecting $3.69 per share in earnings from Nvidia for the next fiscal year.

In all, Nvidia seems well placed to sustain its healthy growth next year as well. The stock has a median 12-month price target of $150, per 65 analysts covering it, pointing toward a 13% upside from current levels. However, the Street-high 12-month price target of $203 would translate into 53% gains from where this AI stock is right now, and it won't be surprising to see Nvidia approaching that mark in 2025 thanks to the points discussed.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where will Nvidia stock be in 2025? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The proliferation of artificial intelligence (AI) has turned out to be a huge catalyst for the semiconductor industry, and that's not surprising as training and moving AI models into production is possible only through chips that are being deployed in huge numbers in data centers.

This is the reason why Nvidia (NASDAQ: NVDA) has witnessed a massive spurt in demand for its graphics processing units (GPUs). The ability of GPUs to process huge amounts of data simultaneously has made them the default choice for cloud service providers to train large language models (LLMs). This explains why Nvidia's data center business has been growing at a phenomenal pace over the past few quarters and is expected to get even bigger in the future.

However, GPUs aren't the only kind of chips that are in terrific demand thanks to the surge in AI adoption. Micron Technology (NASDAQ: MU), a manufacturer of memory chips, has also been winning big from the growing adoption of AI. This article takes a closer look at how AI has been driving Micron's business and examines why this memory specialist looks like a better AI stock to buy right now when compared to Nvidia.

Micron Technology is benefiting from AI adoption in multiple areas

Micron Technology released its fiscal 2024 fourth-quarter results (for the three months ended Aug. 29) on Sept. 25. The company's revenue shot up 93% year over year to $7.75 billion, exceeding the consensus estimate of $7.65 billion. Additionally, Micron swung to a profit of $1.18 per share last quarter as compared to a loss of $1.07 per share in the same period last year. Analysts were expecting the company to deliver $1.11 per share in earnings.

It wasn't surprising to see Micron crushing Wall Street's estimates as the memory market's dynamics have been improving because of AI. For instance, the demand for Micron's data-center memory chips is exceeding supply, and that's not surprising as these chips are used by the likes of Nvidia while manufacturing their GPUs. More specifically, AI-focused GPUs are equipped with high-bandwidth memory (HBM) chips thanks to their ability to process huge amounts of data quickly.

This is the reason why Micron expects the HBM market to generate annual revenue of $25 billion in 2025 as compared to just $4 billion last year. The company also adds that it sold "several hundred millions of dollars" worth of HBM last year, and it has sold out its HBM capacity for next year already.

Meanwhile, the adoption of AI is also leading to an improvement in the demand for solid-state drives (SSDs) used in data centers. Micron's data center SSD revenue tripled in fiscal 2024. It won't be surprising to see Micron maintaining impressive growth in this segment in the future as the deployment of AI servers is expected to drive an average annual growth of 60% in data-center SSD demand in the coming years, according to market research firm TrendForce.

However, this isn't where Micron's AI-related catalysts end. The adoption of AI-enabled PCs is going to be another solid growth driver for the company, driving impressive growth in volumes in both compute and storage-memory chips. On its latest earnings conference call, Micron CEO Sanjay Mehrotra remarked:

AI PCs require a higher capacity of memory and storage. As an example, leading PC OEMs have recently announced AI-enabled PCs with a minimum of 16GB of DRAM for the value segment and between 32GB to 64GB for the mid and premium segments, versus an average content across all PCs of around 12GB last year.

A similar scenario is unfolding in the smartphone market, where Micron points out that Android original equipment manufacturers (OEMs) are launching AI smartphones with 12 gigabytes (GB) to 16GB of dynamic random access memory (DRAM), up from the average capacity of 8GB seen in 2023 flagship smartphones.

IDC estimates that the market for generative AI smartphones could grow at an annual rate of 78% through 2028. On the other hand, Gartner estimates that AI PC shipments could jump a whopping 165% next year. The stunning growth of these end markets presents a bright multiyear opportunity for Micron to grow its sales and earnings thanks to the increase in memory consumption by AI-enabled edge devices, such as smartphones and PCs.

All this indicates that Micron is a more diversified AI stock than Nvidia, as it stands to gain from the adoption of this technology in several ways beyond just data centers. Even better, Micron's forecast suggests that it is about to clock faster growth than its illustrious peer.

Micron's guidance and valuation make it a top AI stock to buy right now

Micron is coming off a terrific fiscal Q4 with remarkable growth in its top and bottom lines. The company expects the momentum to continue in fiscal 2025's Q1. It has guided for $8.7 billion in revenue in the current quarter along with adjusted earnings of $1.74 per share at the midpoint.

The top-line guidance points toward an 85% year-over-year increase, while the bottom line would be a big improvement over the year-ago period's non-GAAP loss of $0.95 per share. For comparison, Nvidia is expecting its top line to grow 80% year over year in the current quarter. That was one of the reasons why investors pressed the panic button after its latest results as the chipmaker has been consistently delivering triple-digit growth in the past few quarters.

What's more, Micron's valuation means that investors looking to add an AI stock to their portfolios right now would do well to buy it right away over Nvidia. Micron's forward price-to-earnings ratio of 11 is significantly lower than Nvidia's forward-earnings multiple of 44, making the former a no-brainer investment right now, considering its eye-popping growth.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The ultimate US artificial intelligence (AI) stock to buy hand over fist right now (Hint: It's not Nvidia) appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Gartner. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Technologies (NYSE: PLTR) has been one of the top-performing stocks on the market in 2024, jumping 115% as of this writing thanks to its accelerating growth, which is being driven by the fast-growing demand for the company's software platforms by both federal customers and commercial clients.

Artificial intelligence (AI) has started playing a key role in the acceleration of Palantir's growth of late. The good part is that Palantir is reportedly the top player in the AI software-platforms market as per market research company Forrester. This puts the company in a terrific position to ensure that its growth rate continues to pick up and hits stronger levels in the long run.

More importantly, a look at Palantir's recent customer wins indicates that the company's offerings continue to remain in hot demand, and that could pave the way for more stock upside in the future. In this article, I will take a closer look at how Palantir is capturing the lucrative AI software-platform market and check why that's likely to lead to outstanding earnings growth in the long run.

Palantir's AI juggernaut isn't showing any signs of stopping

Palantir released its second-quarter 2024 results on Aug. 5. Its revenue shot up 27% year over year to $678 million, which was a big improvement over the 13% year-over-year increase in revenue it reported in the same quarter last year. Meanwhile, the company's non-GAAP earnings shot up 80% from the year-ago quarter to $0.09 per share.

This impressive increase in Palantir's top and bottom lines was a result of the robust growth in its customer base, an expansion in customer spending, as well as strong unit economics which is allowing it to generate more profit from each customer. For example, Palantir's count of commercial customers in the U.S. increased by 83% year over year, but the total contract value from U.S. commercial customers increased at a much faster pace of 152%.

On the other hand, the company's adjusted operating margin increased to 37% in Q2 from 25% in the same quarter last year. This remarkable increase in Palantir's margins explains why its bottom line shot up big time last quarter. The good news for Palantir investors is that it has been winning more contracts since reporting its results last month.

For example, Palantir's Artificial Intelligence Platform (AIP) is set to be deployed by Wendy's Quality Supply Chain Co-op (QSCC). Palantir points out that QSCC is the second-biggest purchasing cooperative in the quick-service restaurant industry and serves more than 6,400 Wendy's locations in the U.S. and Canada. The cooperative will deploy AIP to "improve the scale and speed of decision-making" initially before using the platform for supply chain management and waste prevention.

Earlier this month, Palantir announced that British oil and gas giant BP "will extend their strategic relationship and introduce new artificial intelligence capabilities with Palantir's AIP software." But this isn't where Palantir's recent customer announcements end as Nebraska Medicine, an academic health system, has struck a multimillion-dollar deal to deploy AIP.

And just recently, Palantir said that it has been awarded a $100 million contract by the Army Research Laboratory for using the former's Maven Smart System, a platform that delivers AI capabilities to the Department of Defense.

The above developments indicate that Palantir's AI juggernaut continues to roll, and it is unlikely to stop any time soon. That's because market research company IDC expects the global AI platform-software market to grow at an annual pace of close to 41% through 2028, generating $153 billion in annual revenue at the end of the forecast period.

IDC adds that Palantir is among the top-five AI platform software providers, which means that the company is at the beginning of a massive growth curve considering that the AI platform-software market was worth just under $28 billion last year.

Outstanding earnings growth could translate into more stock-price upside

Palantir's huge addressable market, its leading position in the AI software market, and strong unit economics that are translating into healthy margin gains explain why analysts are expecting the company's earnings to grow at a phenomenal annual rate of 85% for the next five years. Even though such an aggressive earnings-growth rate seems ambitious, it won't be surprising to see Palantir actually delivering the outstanding earnings growth that the market is expecting from it because of the points discussed above.

But even if the company clocks a relatively slower annual earnings-growth rate of 50% for the next five years, its bottom line could jump to $1.90 per share after five years (using its 2023 earnings of $0.25 per share as the base). The stock is currently trading at 87 times trailing earnings. Assuming it trades at a discounted 29 times forward earnings after five years (in line with the tech-laden Nasdaq-100 index being used as a proxy for tech stocks), its stock price could jump to $55.

That would be a 48% increase from current levels. But if Palantir manages to clock faster earnings growth and the market decides to reward it with a richer earnings multiple because of its outstanding growth, it could deliver much stronger gains. That's why investors looking to add a hot growth stock to their portfolios would do well to buy Palantir before it soars higher following the tremendous gains that it has already delivered this year.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 1 Incredible US growth stock that has doubled in 2024 to buy before it jumps at least 48% appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BP and Palantir Technologies. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Apple (NASDAQ: AAPL) is the most valuable company in the world right now with a market cap of $3.4 trillion. But a closer look at the company's recent financial performance indicates that it is finding it difficult to put its growth into a higher gear.

For instance, in the third quarter of fiscal 2024 (which ended on June 29), Apple's revenue increased just 5% year over year to $85.8 billion. Analysts are expecting this "Magnificent Seven" stock to finish the year with a 9% increase in revenue to $390 billion. Additionally, its revenue is expected to increase by just 8% in the next fiscal year.

This lukewarm growth at Apple can be attributed to the company's already massive revenue base. Moreover, Apple's bread-and-butter end market of smartphones is already quite huge, and its growth has stagnated. Market research firm IDC estimates that the global smartphone market could reach an annual growth rate of just 2.3% through 2028.

Considering that Apple is reliant on the iPhone for 52% of its revenue, it is not surprising to see that it's not expected to grow at a blistering pace anymore. This is precisely the reason Apple could lose its crown as the world's most valuable company to Nvidia (NASDAQ: NVDA), a company that is sitting on lucrative and fast-growing end markets that could help it deliver impressive growth over the next decade.

Let's look at the reasons why Nvidia could be worth more than Apple after a decade.

Nvidia is set to benefit from massive growth opportunities in multiple end markets

Nvidia is currently the third-most valuable company in the world with a market cap of $2.85 trillion, which means that it is not very far from catching Apple. The terrific pace at which Nvidia has been growing tells us that it can indeed catch the iPhone maker over the next decade.

The company, which is known for its graphics processing units (GPUs), reported phenomenal revenue growth of 122% in the second quarter of fiscal 2025 to $30 billion. Nvidia has been riding the artificial intelligence (AI) wave, with its chips being deployed for training popular AI models such as ChatGPT. And now, Nvidia is diversifying into areas beyond AI training so that it can sustain its handsome growth for a long time to come.

For instance, on its August earnings conference call, Nvidia management pointed out that AI inference applications have accounted for more than 40% of its data center revenue. This is an important trend to note as inference is the process of using a trained AI model to generate results from a fresh set of data. So, Nvidia has moved beyond AI training and is now getting a nice chunk of revenue from the AI inferencing space as well.

That's good news for the company's long-term prospects as its presence in both these markets should allow it to remain a dominant force in AI chips. Investors should note that the market for AI chips is expected to generate $300 billion in revenue in 2034, growing at an annual rate of 22% over the next decade.

Nvidia reportedly controls 70% to 95% of the AI chip market, according to various estimates, leaving very little for rivals such as Advanced Micro Devices and Intel. It won't be surprising to see that trend continue over the next decade as well, as a result of which Nvidia could sustain its elevated levels of growth for a long time to come.

Additionally, Nvidia is diversifying into lucrative markets such as AI enterprise software, where it has started witnessing impressive growth. This could unlock another lucrative growth opportunity for the company as the AI software market is expected to generate a whopping $1 trillion in revenue by 2032, according to Precedence Research.

Then again, Nvidia has other solid growth drivers in the form of the nascent but potentially massive cloud gaming space where it has already established a solid position for itself. All this explains why the company is forecast to grow at a much faster pace than Apple.

Faster growth could help the chipmaker overtake Apple's market cap

Analysts are expecting Apple's earnings to increase at a compound annual growth rate (CAGR) of 11% over the next five years. There is a chance that the iPhone maker's earnings growth could accelerate in the long run thanks to the growing contribution of the company's high-margin services business, but it is likely to be hamstrung by the slow pace of growth in smartphone sales over the next decade.

Precedence Research estimates that the global smartphone market could see 7% annual growth through 2034. While that's rosier than IDC's forecast, Precedence believes that the adoption of technologies such as augmented reality and virtual reality are likely to help the smartphone market achieve faster growth. But it is worth noting that these technologies have been around for some time and they haven't been enough to inject life into the smartphone market.

On the other hand, the advent of AI turned out to be a massive catalyst for Nvidia. Analysts are forecasting the company's earnings to increase at a CAGR of 52% over the next five years, a much faster pace than what Apple is expected to report. Moreover, Nvidia's end markets are set to grow at a much faster pace than Apple's, and the good part is that the company is the dominant player in most of those markets.

So, there is a good chance that Nvidia could outperform Apple's growth by a big margin over the next decade, and the market could reward the former with more upside as a result and help it become a more valuable company.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: 1 US stock that will be worth more than Apple 10 years from now appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: short November 2024 $24 calls on Intel. The Motley Fool Australia has recommended Apple and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock's breathtaking rally that began toward the end of 2022 has taken a hiatus of late. More specifically, shares of Nvidia have witnessed some volatility since the beginning of July, and the company's solid fiscal 2025 second-quarter results haven't been enough to inject some life into its fortunes on the stock market.

The reasons behind Nvidia's recent volatility can be attributed to concerns about a slowdown in its growth, as well as the viability of artificial intelligence (AI) technology following the massive investments made in this space by companies and governments across the globe. However, Nvidia's quarterly results and bullish guidance make it clear that the company's impressive growth is here to stay.

Moreover, a closer look at the consensus stock price target indicates analysts expect Nvidia stock to regain its mojo. Nvidia has a median 12-month price target of $150 as per 63 analysts covering the stock, which would be a 28% jump from current levels. However, the Street-high price target of $200 suggests that Nvidia stock could jump another 71% over the next year.

Here's why this semiconductor company's shares could hit that mark in 2025.

Nvidia's dominance in AI chips is going to be the driving force behind the stock

Strategic advisory firm Constellation Research gave Nvidia stock a $200 price target in June this year. The firm points out that the semiconductor bellwether enjoys several advantages that could send its shares to $200 in the coming year and even help it sustain its rally for a longer period.

Constellation says Nvidia has managed to create high barriers to entry in the AI chip market and has a robust product roadmap, while high switching costs mean that customers who are locked into its ecosystem are unlikely to move to a competing offering anytime soon. Because of these reasons, the research firm estimates Nvidia enjoys a technology lead of 24 months over its rivals in the AI graphics card market.

A closer look at Nvidia's recent quarterly results will show that it is indeed the go-to supplier of graphics cards for companies and governments looking to train and deploy AI models. The company's revenue in the second quarter of fiscal 2025 shot up an impressive 122% year over year to $30 billion. The data center business produced $26.3 billion in revenue during the quarter, a jump of 154% from the same period last year.

Nvidia CEO Jensen Huang pointed out that the demand for the company's graphics cards based on the Hopper architecture remains solid, with shipments expected to increase in the second half of the fiscal year. That's a testament to Nvidia's outstanding moat in the AI graphics processing unit (GPU) market as the company's next-generation Blackwell chips are already sampling with customers and are set to go into full production from the fourth quarter of the fiscal year.

In other words, customers are still willing to purchase Nvidia's older AI chips even though the new ones are on the way, suggesting that its products are indeed superior to rivals such as AMD and Intel. For instance, Nvidia's Hopper H200 processor reportedly outperforms its AMD rival, MI300X, by more than 40% in AI inference applications. Considering that the H200 reportedly costs less than the MI300X, it is easy to see why Nvidia has been witnessing an improvement in the demand for this chip even though newer chips are on the way.

Not surprisingly, Nvidia is likely to maintain its dominant position in the AI chip market. That's also helping the company maintain healthy pricing power and enjoy fat margins. For example, Nvidia's non-GAAP gross margin increased by 5 percentage points on a year-over-year basis last quarter to 75.1%.

As a result, the company's adjusted earnings jumped 152% year over year to $0.68 per share, prompting analysts to increase their earnings projections for the current and the next fiscal year.

NVDA EPS Estimates for Current Fiscal Year data by YCharts

The stock could exceed $200 in 2025

The chart above indicates that Nvidia's earnings could hit $4 per share in the next fiscal year (which will coincide with the majority of calendar 2025). However, there is a good chance that its earnings could exceed that mark as analysts could continue to raise their growth expectations because of a potentially big jump in its data center revenue next year.

Let's assume that Nvidia's earnings really do increase to $4 per share. That would be a 41% increase over its projected fiscal 2025 earnings. If the stock maintains its price-to-earnings ratio of 55 at that time, the stock price could jump to $220. It is worth noting that Nvidia is currently trading at a relative discount to its five-year average price-to-earnings ratio of 72.

More importantly, this company can justify its valuation through impressive growth because of its robust position in the AI chip market. So, there is a good chance that this AI stock could resume its journey north and go past $200 next year.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: Nvidia stock could hit $200 in 2025 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: short November 2024 $24 calls on Intel. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More specifically, LSEG Data & Analytics is forecasting Nvidia's revenue to increase by 112% on a year-over-year basis to $28.6 billion. That's slightly higher than the midpoint of Nvidia's revenue guidance range of $28 billion for Q2. However, LSEG data indicates that Nvidia's adjusted gross margin may have dropped from fiscal Q1 due to the company's investments in ramping up production capacity.

If that's accurate, Nvidia's gross margin would fall below its guidance of 75.5% for fiscal Q2. Now, a slip by Nvidia in its quarterly performance or the accompanying guidance could send its shares tumbling. If that's indeed the case, it may be a good idea for savvy investors to buy this semiconductor bellwether.

However, the possibility of Nvidia's results and guidance exceeding expectations cannot be ruled out. In this article, we will examine three reasons why investors should consider buying Nvidia stock before its upcoming results.

1. An attractive valuation makes the stock worth buying right now

Nvidia's expensive valuation has been a cause for concern in recent months, which is not surprising considering the stunning surge the stock has enjoyed since the end of 2022. However, a closer look at the stock's multiples will make it clear that investors are getting a good deal on this high-flying chipmaker right before its earnings report.

Nvidia currently trades at 48 times forward earnings. For comparison, the U.S. technology sector currently has an average earnings multiple of 46. Meanwhile, the stock's price/earnings-to-growth ratio (PEG ratio) provides an even better gauge of how attractively valued Nvidia is right now. That's because the PEG ratio is a forward-looking valuation metric calculated by dividing a stock's trailing P/E ratio by the estimated earnings growth that it could deliver.

A PEG ratio of less than 1 indicates that a stock is undervalued. By that measure, Nvidia stock seems extremely undervalued with respect to the earnings growth that it is likely to deliver.

NVDA PEG Ratio data by YCharts

As such, Nvidia is still a solid bet for investors looking to add a growth stock to their portfolios right now, especially considering that there are indications that it could deliver better-than-expected results.

2. These AI hardware companies indicate that Nvidia is poised to deliver solid results

The earnings season is about to end, which means that we can get a fair idea about the health of the AI hardware market based on results from other companies in this ecosystem.

For instance, Nvidia's foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC, saw its top line jump 33% year over year in the second quarter of 2024 (which coincided with two months of Nvidia's fiscal Q2). That was a significant jump from the 13% year-over-year jump in revenue that TSMC delivered in the first quarter of the year. It is also worth noting that TSMC's July revenue increased 45% year over year, outpacing the growth it has witnessed in the first two quarters of the year.

TSMC has been working hard in recent months to increase its packaging capacity of advanced chips that are used to manufacture AI chips for Nvidia. So, the surge in TSMC's quarterly revenue growth provides strong evidence of robust growth in Nvidia's revenue and earnings, especially because Nvidia is TSMC's second-largest customer.

However, TSMC isn't the only AI hardware player that has seen a significant surge in revenue recently. Super Micro Computer (NASDAQ: SMCI), which manufactures AI server solutions used for mounting chips from chipmakers such as Nvidia, reported 143% year-over-year revenue growth in the fourth quarter of fiscal 2024 (which ended on June 30).

Supermicro attributed its phenomenal growth to the "strong demand for next generation air-cooled and direct liquid-cooled (DLC) rack-scale AI GPU platforms." What's more, the midpoint of Supermicro's revenue guidance for the current quarter stands at $6.5 billion, which would be a 216% increase from the same quarter last year.

Again, this is an indication that Nvidia could be ramping up the production of its next-generation Blackwell chips, which the company had promised would arrive later in 2024. Nvidia, therefore, could not only deliver results that may outpace Wall Street's expectations, but its guidance could also turn out to be solid and help the stock sustain its stunning rally.

3. Big tech's capex surge is good news for Nvidia investors

Technology titans such as Microsoft, Meta Platforms, Alphabet, and Amazon have been ramping up their capital expenditures (capex) to bolster their AI infrastructure. For instance, Microsoft's fiscal 2024 capital spending rose 75% from the previous year to almost $56 billion. The company expects to raise its capex once again in the current fiscal year to spend money on building more AI services so that it can position itself for long-term growth.

Alphabet, on the other hand, could end the year with capex of around $50 billion as it intends to keep pouring money into servers and data centers. That would be a major increase over last year's capex of $32 billion. Even Meta raised its 2024 capital expenditure guidance to a range of $37 billion to $40 billion, up from the prior range of $35 billion to $40 billion. The social media giant's 2023 capex stood at $28 billion, and it expects its capital spending to continue rising into 2025.

Investors should note that all of these companies have been Nvidia's customers, purchasing the company's chips to train and deploy AI models. Even better, they are set to adopt the chipmaker's next-generation Blackwell processors as well, and Nvidia expects that the demand for these new chips will outpace supply well into 2025. This potential spending could carry the company for quarters and even years to come.

In all, there is enough evidence that the demand for Nvidia's AI chips continues to remain healthy, allowing it to deliver results that could exceed consensus estimates and guide above expectations. If that happens, shares of Nvidia could get another shot in the arm, which is why it may be a good idea for long-term-minded investors to buy this AI stock before it potentially soars further after Aug. 28.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons to buy Nvidia stock before August 28 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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 Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock has sustained its stunning rally in 2024 as shares of the chipmaker have already surged an eye-popping 144% so far this year. And the good part is that the company has given investors multiple reasons to be bullish in recent days. 

The company announced terrific fiscal 2025 first-quarter results that put to rest any doubts about Nvidia's dominance in the artificial intelligence (AI) chip market. Additionally, it unveiled a new chip architecture that will be launched in 2026, a move that could help ensure that it maintains its technology lead over rivals.

Also, Nvidia management's announcement of a 10-for-1 forward stock split seems to have given the stock another big boost, sending the company's market capitalization to almost $3 trillion as of this writing. Nvidia briefly became the world's second-most valuable company after Microsoft, overtaking Apple in the charts before falling back to third position.

But can Nvidia overtake Microsoft and eventually head to a $5 trillion market cap in the wake of its stock split? Let's find out.

Nvidia stock has soared big time since its last stock split

First of all, investors should note that a stock split is nothing but a cosmetic move. It doesn't alter a company's fundamentals, market cap, or prospects. In a forward stock split, a company simply increases its outstanding share count while keeping the market cap intact. So, in Nvidia's case, a 10-for-1 forward stock split that went into effect on June 7 means that if you owned a single share before the split, you would have 10 shares now.

However, the value of your investment will not change as the price of each Nvidia share will be reduced to reflect the split. This makes it clear that Nvidia's stock split won't alter the company's fundamentals and growth drivers, nor should it affect its performance on the market.

At the same time, there is a belief that stock splits could increase the demand for a company's shares. Investors who couldn't afford to buy Nvidia's shares earlier will now be able to do so, as the price of each share will come down substantially following the split on account of an increased share count. Of course, many brokerage firms allow investors to purchase fractional shares, so the concept of a split may be redundant for those investors.

However, if we look at Nvidia's previous stock split, which was executed in July 2021, it can be seen that its shares have appreciated big time since then. Nvidia management announced a 4-to-1 forward stock split on May 21, 2021, and it started trading on a split-adjusted basis from July 20 of that year.

Nvidia stock has surged an eye-popping 706% since it announced that 4-to-1 split in May three years ago.

NVDA data by YCharts.

Its market cap surged from $373 billion on May 21 to just under $3 trillion today. Now, past performance is not an indicator of a company's future, and buying Nvidia following its stock split in anticipation that it could repeat its stunning run because of a cosmetic move is illogical.

However, a closer look at Nvidia's prospects suggests the company could very well achieve a $5 trillion market cap despite the stock split. Let's look at the reasons.

Why a $5 trillion market cap seems attainable

To understand why Nvidia stock has surged so remarkably in the past three years, let's examine its financial performance during this period.

Nvidia's revenue in fiscal 2021 (which ended in January 2021) stood at $16.7 billion, while its non-GAAP (generally accepted accounting principles) net income was $6.27 billion. Cut to fiscal 2024 (which ended in January this year), Nvidia's revenue was $60.9 billion, and its non-GAAP net income zoomed to $32.3 billion. That translates into a top-line compound annual growth rate (CAGR) of 54%, while its earnings increased at a CAGR of almost 73%.

The massive demand for Nvidia's AI chips has been central to this phenomenal growth. Of the $60.9 billion revenue it generated in fiscal 2024, $47.5 billion came from the data center segment. It is worth noting that Nvidia's data center revenue in the first quarter of fiscal 2025 (which ended on April 28, 2024) shot up 427% year over year to a record $22.6 billion. So, Nvidia has generated nearly half of its fiscal 2024 data center revenue in just one quarter of the new fiscal year.

More importantly, the company's robust data center growth is here to stay, as management points out that the demand for its upcoming Blackwell-based AI chips is so strong that it will have difficulty meeting the same going into 2025. Additionally, Nvidia is looking to keep the heat on its rivals by announcing the Rubin platform for 2026, which will succeed its Blackwell architecture.

Though Nvidia didn't offer many details about Rubin, one can expect chips based on this platform to be faster than the Blackwell processors since they could be manufactured on an advanced 3-nanometer (nm) process. The Blackwell chips are manufactured on a 4 nm process and offer a tremendous increase in computing power and efficiency over the previous-generation Hopper architecture.

All this explains why analysts are upbeat about Nvidia's data center growth and expect this segment to deliver phenomenal revenue in the coming years. Moreover, as the following chart indicates, Nvidia's revenue could exceed $182 billion in fiscal 2027.

NVDA Revenue Estimates for Current Fiscal Year data by YCharts.

Using fiscal 2024's revenue of $60.9 billion as the base, the above revenue forecast for fiscal 2027 suggests Nvidia's top line could clock a CAGR of over 44% for the next three years. Throw in Nvidia's pricing power in the AI chip market, and its earnings could grow at a faster pace.

Nvidia stock needs to rise another 68% from current levels to attain a $5 trillion market cap, and the potential growth it could offer over the next three years could help it hit that milestone. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia going to $5 trillion after its 10-for-1 stock split? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• 5 ASX ETFs that could supercharge your portfolio
• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.