The chipmaker needs the law of supply and demand to work in its favor in a big way.
It's taken Nvidia (NVDA 6.18%) roughly seven months to double in value. The stock also doubled in the seven months before then. I think it's highly unlikely that Nvidia will deliver another 100% return over the next seven months.
However, put more time on the clock, and we could have a different ballgame. Here's exactly what it will take for Nvidia stock to double again over the next five years.
Surging demand for GPUs
The most important factor that will determine whether or not Nvidia stock doubles within five years is the law of supply and demand. In a nutshell, this law states that if supply falls and/or demand increases, prices will rise – and vice versa. In Nvidia's case, the supply and demand for its stock are directly linked to the supply and demand of its graphics processing units (GPUs).
Let's talk first about the demand side of the equation.
The biggest driver of demand for Nvidia's GPUs over the next five years will almost certainly be artificial intelligence (AI). Market researcher Markets and Markets projects the global AI chip market will increase by a compound annual growth rate of 20.8%. Another market researcher, The Brainy Insights, expects a CAGR of nearly 38.2%.
Even if we use the lower estimate, the demand for Nvidia's GPUs would soar more than 250% over the next five years. All the company has to do is at least keep pace with the overall AI chip market. Considering Nvidia's commanding position in the market now, that shouldn't be a problem.
But is the level of growth for the AI chip market predicted by market researchers realistic? I think so. Generative AI and autonomous ride-hailing services are only in their early stages. Both should continue to grow rapidly over the next few years. Also, don't rule out the possibility of major breakthroughs in artificial general intelligence (AGI) that drive increased demand for powerful AI chips.
Supply side economics
Now, let's address the supply side.
The economics for Nvidia are simple: As long as there aren't enough viable alternative suppliers of AI chips to meet customers' needs, Nvidia's GPUs will dominate the market. I suspect this could be more of a challenge for Nvidia than demand growth.
Multiple companies are angling to take away market share from Nvidia. Advanced Micro Devices and Intel have launched new AI chips that they argue are more cost-effective than Nvidia's flagship H100 GPU. Several of Nvidia's big customers have developed their own chips to reduce their reliance on Nvidia, including Google parent Alphabet , and Amazon .
However, increased competition doesn't mean Nvidia's share price can't double over the next five years. As long as demand for Nvidia's GPUs grows fast enough, how much market share rivals take is irrelevant.
The best way for Nvidia to keep its chips on top is to out-innovate everyone else. Nvidia is clearly trying to do this, as evidenced by the recent introduction of its next-generation Blackwell platform the company says can "run real-time generative AI on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor."
The biggest obstacle for Nvidia's chances of doubling
I've intentionally left out of the discussion what's arguably the biggest obstacle to Nvidia's chances of doubling over the next five years. It's valuation. Nvidia's shares currently trade at 35.6 times sales. This multiple reflects expectations of a lot of growth.
NYU finance professor Aswath Damodaran, known as the "Dean of Valuation," thinks Nvidia's fair value assuming a revenue CAGR of 32% over the next five years is $436. Nvidia's current share price is more than twice that amount. If Damodaran is right, Nvidia stock is more likely to be halved than it is to double over the next five years. However, Damodaran readily admits that he could be underestimating the demand for Nvidia's chips.
One critical ingredient isn't always incorporated in valuation models, though -- investors' expectations of growth beyond the time horizon used by the models. I think Nvidia stock will double over the next five years if the demand for its GPUs exceeds estimates, the company out-innovates its rivals, and investors think those trends will continue well beyond five years into the future.
FAQs
I think Nvidia stock will double over the next five years if the demand for its GPUs exceeds estimates, the company out-innovates its rivals, and investors think those trends will continue well beyond five years into the future.
What is the 5 year return of Nvidia stock? ›
Five Year Stock Price Total Return for NVIDIA is calculated as follows: Last Close Price [ 877.57 ] / Adj Prior Close Price [ 44.94 ] (-) 1 (=) Total Return [ 1,852.6% ] Prior price dividend adjustment factor is 0.99.
Is Nvidia going to go back up? ›
Analysts' Bullish Price Targets For Nvidia Stock
He sees stronger demand in 2024 and 2025 for Nvidia's chips. Analysts at HSBC also increased their price target, going to 1,050 from 880. Both Truist and HSBC maintained a buy rating on the stock.
Will Nvidia ever bounce back? ›
While Nvidia could bounce back to launch a new breakout, the tone of the market, in general, and Nvidia, in particular, has shifted. Depending on an investor's position in Nvidia, short- and long-term expectations, and his or her risk-tolerance, some profit-taking may be in order.
What will Nvidia stock be worth in 2025? ›
NVIDIA stock prediction for 1 year from now: $ 1,565.22 (78.36%) NVIDIA stock forecast for 2025: $ 1,581.65 (80.23%) NVIDIA stock prediction for 2030: $ 30,078 (3,327.44%)
What is the return on Nvidia stock for 10 years? ›
How does undefined's 10 Year Price Total Return benchmark against competitors?
| Name | 10 Year Price Total Return |
|---|
| Microsoft Corporation | 1,074.0% |
| Broadcom Inc | 2,767.4% |
| Advanced Micro Devices Inc | 3,874.7% |
| NVIDIA Corporation | 19,755.7% |
8 more rowsNvidia stock price stood at $877.35
According to the latest long-term forecast, Nvidia price will hit $1700 by the end of 2024 and then $2000 by the middle of 2025. Nvidia will rise to $2500 within the year of 2026, $3500 in 2027, $4000 in 2029 and $5000 in 2032.
Will Nvidia stock split in 2024? ›
With a high stock price, good momentum and an optimistic outlook, Nvidia is poised for a stock split in 2024. A split doesn't change the stock's potential for volatility, so do your research to ensure the move is right before you buy.
Should I hold Nvidia? ›
Nvidia has 14.96% upside potential, based on the analysts' average price target. Is NVDA a Buy, Sell or Hold? Nvidia has a conensus rating of Strong Buy which is based on 39 buy ratings, 2 hold ratings and 0 sell ratings.
Is Nvidia overpriced now? ›
Nvidia currently trades at 35.4x forward earnings, making it more expensive than the S&P 500 (SPX), but it's by no means too expensive for the tech sector. Moreover, the company is expected to continue delivering stellar growth throughout the medium term.
There was fear that Nvidia's (NASDAQ:NVDA) stock rally may had run its course when the stock dipped around 5% in one trading day a few weeks ago. However, they were completely wrong. Nvidia's shares seem to defy gravity, nearing $1000/share. The stock has nearly doubled in 2024.
Who is Nvidia's biggest rival? ›
Huawei developed the Ascend series of chips as a rival to Nvidia's line of AI chips. The Chinese company's main product, the 910B chip, is its main rival to Nvidia's A100 chip, which launched roughly three years ago. Analysts have estimated China's AI chip market to be worth $7 billion.
Does Nvidia have a future? ›
Even with tremendous growth in revenue and profit, Nvidia holds another ace up its sleeve to continue dominating the AI and computing markets. High-end chip maker Nvidia (NVDA 6.18%) has smashed expectations year over year, with annualized revenue growth of 60% since 2021.
What is the future of Nvidia stock prediction for 2025? ›
Meanwhile, the Nvidia stock forecast 2025 of algorithm-based WalletInvestor is much more bullish, putting the stock at $1,363 in 12 months' time. However, its five-year NVDA stock forecast expects it to move even higher and reach $3,200 by April 2029.
Can Nvidia reach 10,000? ›
Nvidia (NVDA) stock has very little chance of hitting $10,000 by the end of next year, but it's fun to ponder the possibility. To reach $10,000, it needs significant multiple expansion.
What is the true value of Nvidia stock? ›
As of 2024-04-29, the Intrinsic Value of NVIDIA Corp (NVDA) is 352.38 USD. This NVIDIA valuation is based on the model Discounted Cash Flows (Growth Exit 5Y). With the current market price of 877.35 USD, the upside of NVIDIA Corp is -59.8%. The range of the Intrinsic Value is 252.42 - 598.84 USD.
What is Nvidia annual average return? ›
Returns By Period
NVIDIA Corporation had a return of 53.88% year-to-date (YTD) and 181.23% in the last 12 months. Over the past 10 years, NVIDIA Corporation had an annualized return of 67.31%, outperforming the S&P 500 benchmark which had an annualized return of 10.22%.
What is the ROI of Nvidia? ›
Nvidia Corp achieved a return on average invested assets (ROI) of 69.06 % in its fourth quarter of 2024, this is above NVDA's average return on investment of 19.55%. ROI has improved compared to 63.83% in the third quarter of 2024, due to net income growth.
Is Nvidia a buy sell or hold? ›
Nvidia's analyst rating consensus is a Strong Buy. This is based on the ratings of 41 Wall Streets Analysts.
What will Nvidia stock price be in 2040? ›
Based on these scenarios, the stock prices forecast for 2040 range between $1,694 and $8,191. Extending the same growth rates to 2050, the stock price forecast models span from $2,759 to $33,718 per share. Nvidia is expected to reach $1,160 per share by Q1 2025, according to the CoinCodex algorithm, reflecting approx.
