Nvidia (NASDAQ:NVDA) stock is slumping, dropping 12% from its recent record high. Despite a blowout quarter where data center revenue more than doubled to $30 billion, the market seemed more focused on guidance, which showed a coming slowdown.
24/7 Wall St. Key Points:
- Nvidia (NVDA) has been an incredible growth juggernaut, but the market is beginning to question how long it can maintain its momentum.
- Generating $500 billion in revenue may seem a fanciful stretch goal for the chipmaker, considering current hurdles placed in its path, but there remains a pathway open to achieve this milestone.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Instead of the triple-digit growth investors have been accustomed to, Nvidia forecast sales would grow just 69% in the fourth quarter. Coupled with probes from the Justice Dept. and China over monopolistic market practices, supply chain concerns, and “staggering” demand for its latest AI accelerator Blackwell, and investors are worried the tech juggernaut is going to stall.
Fiscal full-year 2025 revenue is projected to come in around $129 billion, twice what it generated last year. It took Nvidia just three years to quadruple its revenue. Yet with demand so large and supercharged growth still on the table, what is the likelihood Nvidia is able to expand sales fivefold and hit $500 billion over the next decade?
A growth spurt like no other
Nvidia is clearly in the midst of an exponential growth cycle. In the fiscal third quarter, data centers, which houses the chipmaker’s AI business, accounted for an overwhelming 87% of total revenue, a clear indication of where Nvidia’s immediate future lies. The surge is largely fueled by the insatiable demand for AI infrastructure, with Nvidia’s graphics processing units (GPUs) standing out as the go-to solution for AI model training and inference, most notably for applications like ChatGPT.
The market for AI chips is projected to flourish, with analysts at Marketsandmarkets suggesting it could reach a colossal $373 billion annually by 2029, an incredible 27.7% compounded annual growth rate (CAGR).
Having established itself as the undisputed market leader, Nvidia is obviously best-positioned to capitalize on this growth. But the easy run higher has already been achieved. Although Nvidia remains at the forefront of cutting edge computing technology, the road is not without its hurdles.
A burgeoning AI field
Competition is increasing. Both Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC), are vying for a slice of this lucrative market and pose a significant challenge to Nvidia.
AMD’s advancements in power-efficient chips and Intel’s push with products like Gaudi 3 could erode Nvidia’s dominance if not countered with superior technology or strategic market maneuvers.
There is also the threat from current customers like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META) rushing out their own AI accelerators. They are not necessarily going to abandon Nvidia, simply because their chip appetite is so voracious, but the growth trajectory just might not be as stark as it was previously.
Additionally, Nvidia must address current supply chain constraints to meet the burgeoning demand. Being supply-constrained could cap revenue growth if Nvidia cannot scale production to match market needs.
Exponential growth as far as the eye can see
Still, there is more than just a ray of hope. Analyst consensus estimates reflect optimism with revenue expected to exceed $195 billion in fiscal year 2026. At current percentages, that suggests data center revenue could soar as high as $170 next year, demonstrating confidence in Nvidia’s market position.
Even if Nvidia’s share of the market slides over the next decade, falling to 60%, the chipmaker could still potentially generate around $224 billion annually just from data centers. It suggests Nvidia reaching $500 billion in total revenue a decade from now remains well within the realm of possibility. But there’s good reason to believe that won’t happen.
Although its Blackwell chip isn’t out yet, Nvidia is already at work on its successor, Rubin, that will have several advanced features. It is expected to launch in 2026. So Nvidia isn’t just sitting around waiting for the competition.
Also, in a recent interview Meta CEO Mark Zuckerberg noted that its large language model (LLM) Llama 3 was training on 10,000 to 20,000 GPUs while Llama 4 could train on more than 100,000 GPUs. The iterations after that could scale exponentially beyond that. It could always hit a limit, but Zuckerberg says “it’s also possible that limit is not going to happen anytime soon.”
While Meta is building its own AI chips now, it still needs to rely upon Nvidia and it is just one customer. This is the sort of expansion that is starting to occur across all sectors of the economy.
Key takeaways
Certainly, if the AI hype cools or if other technologies emerge to challenge the current AI model, Nvidia’s growth could diminish. The chipmaker’s continuing ability to diversify and innovate beyond just GPUs into comprehensive AI solutions, including software and integrated systems, will be crucial in sustaining long-term growth.
To reach these lofty heights, Nvidia needs to see a sustained increase in AI application across sectors like healthcare, automotive, and finance, where AI is still in the early stages of deployment. That hints at more tremendous growth to come.
Although Nvidia has some hurdles to surmount, if it can orchestrate these elements effectively, the company might not only meet, but exceed this financial milestone.
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