Is NVIDIA on its way to becoming the first $5 trillion company?

NVIDIA, the semiconductor giant based in Santa Clara, California, has experienced an extraordinary surge in its stock value, rising more than 200 per cent over the past year. This remarkable growth has led one of its most optimistic analysts to project that the company could reach a market value of nearly $5 trillion in the coming year.

Rosenblatt Securities analyst Hans Mosesmann recently increased his price target for NVIDIA to a Wall Street high of $200 from $140. This adjustment comes on the heels of NVIDIA’s recent 10-for-1 stock split on June 10. Following this announcement, NVIDIA’s stock rose by as much as 2.7 per cent, hitting new intraday highs.

Experts are bullish
Mosesmann has been bullish on NVIDIA since he began covering the stock in 2017, consistently maintaining a buy rating. While he acknowledges the strength of NVIDIA’s hardware, he emphasizes that “the real narrative lies in the software that complements all the hardware goodness.” He predicts that the software aspect will play an increasingly significant role in NVIDIA overall sales mix over the next decade, contributing to a sustained increase in valuation.

NVIDIA’s stock enjoys widespread support among analysts, with 64 buy ratings, seven holds, and just one sell rating, according to Bloomberg. As of Monday’s close, NVIDIA’s shares had risen 165 per cent in 2024, adding over $2 trillion to its market capitalization. This meteoric rise puts NVIDIA in a position to potentially surpass Microsoft and Apple as the world’s most valuable company.

A $10 trillion valuation soon?
Some analysts believe NVIDIA is on track to become the first $10 trillion company.  Writing for Forbes, Beth Kindig, CEO and Lead Tech Analyst for the I/O Fund asserts that NVIDIA could reach this milestone by 2030 or sooner. She attributes this potential to NVIDIA’s rapid product development, the strength of its CUDA software platform, and its expansion beyond GPUs into networking and software platforms.

To grasp why NVIDIA’s stock has surged so dramatically, it’s essential to examine its financial performance over the past few years. In fiscal 2021, which ended in January 2021, NVIDIA’s revenue was $16.7 billion, with a non-GAAP net income of $6.27 billion.

By fiscal 2024, which ended in January this year, NVIDIA’s revenue had soared to $60.9 billion, and its non-GAAP net income had increased to $32.3 billion. This represents a compound annual growth rate (CAGR) of 54 per cent for revenue and nearly 73 per cent for earnings.

Massive demand not dying anytime soon
The massive demand for NVIDIA’s AI chips has been central to this phenomenal growth. In fiscal 2024, NVIDIA generated $47.5 billion of its $60.9 billion revenue from the data centre segment. In the first quarter of fiscal 2025, which ended on April 28, 2024, NVIDIA’s data centre revenue skyrocketed 427 per cent year-on-year to a record $22.6 billion. This means Nvidia generated almost half of its fiscal 2024 data centre revenue in just one quarter of the new fiscal year.

NVIDIA’s robust data centre growth is expected to continue. The company’s management highlights the strong demand for its upcoming Blackwell-based AI chips, which could lead to supply challenges into 2025. Additionally, NVIDIA plans to maintain its competitive edge with the announcement of the Rubin platform for 2026, set to succeed the Blackwell architecture.

Although NVIDIA has not provided many details about Rubin, it is anticipated that the chips based on this platform will be faster than the Blackwell processors, likely utilizing an advanced 3-nanometer (nm) process. The Blackwell chips, manufactured on a 4 nm process, already offer significant improvements in computing power and efficiency over the previous-generation Hopper architecture.

Analysts are highly optimistic about NVIDIA’s future, particularly regarding its data centre growth. They expect this segment to continue delivering exceptional revenue in the coming years. According to projections, NVIDIA’s revenue could exceed $182 billion by fiscal 2027.