Prediction: This Could Be Nvidia's Stock Price By the End of 2027

Since the dawn of artificial intelligence (AI) in early 2023, Nvidia (NASDAQ: NVDA) has emerged as the de facto poster child for the space. The company's graphics processing units (GPUs), which were originally designed to create lifelike images in video games (ergo the name), have been repurposed to provide the sheer number-crunching capabilities needed to train and run AI models.

During that time, Nvidia's financial results have been on quite a tear, with a 1,250% increase in revenue and a 4,000% jump in net income. These blistering financial results have driven the stock up 1,320%, enriching shareholders along the way. Indeed, some investors have begun to wonder if the remaining upside is limited, especially since Nvidia is already the world's largest public company with a market cap of $5 trillion (as I write this).

However, Nvidia claims to have clear visibility into its sales over the coming two years, and the numbers are staggering.

Image source: Getty Images.

The data center is driving this train

While Nvidia's GPUs are the face of the company's success, it's the company's comprehensive, full-stack approach that has kept the competition at bay. Nvidia combines its processors with a host of accessories and software that ensure optimal performance from its industry-leading GPUs.

The company has mastered the concept of parallel processing, a technique for subdividing large computational tasks into smaller, more manageable tasks, which are then assigned to multiple cores and processed in parallel by the GPU. This accelerates intensive workloads, completing them more quickly than would otherwise be possible. This is the "secret sauce" that has enabled AI to thrive and fueled Nvidia's epic run.

Currently, the vast majority of AI processing takes place in the data center. This has, in turn, fueled the ongoing data center boom, with spending expected to reach $7 trillion by 2030, according to McKinsey & Company. Not surprisingly, Nvidia commands a significant share of the data center GPU space. While estimates vary, the company controls between 85% and 92% of the market.

Nvidia CEO Jensen Huang has made no secret about what's to come over the next couple of years, and the implications are clear. Huang said:

We have $500 billion dollars' worth of visibility. And at this point, at this point, with another 21 more months to go to the end of (calendar) 2027, we already have high confidence, high confidence visibility of $1 trillion plus of Blackwell and Rubin, not anything else, just Blackwell and Rubin.

Fun with numbers

Using Huang's forecast as a starting point, we can run the numbers to estimate Nvidia's stock price by the end of next year.

For its fiscal 2027 first quarter (ended April 26), the company generated record revenue of $81.6 billion, up 85% year over year. This suggests that Nvidia expects to generate the remaining $918 billion over the next seven quarters.

Running the numbers reveals it will take roughly 12% sequential growth in each of the next seven quarters to generate total revenue of $1 trillion over two years. Mathematically, Nvidia would generate revenue of roughly $389 billion in 2026 and $611 billion in 2027. That works out to 80% growth this year and 57% next year, which isn't hard to imagine, given the 85% growth it delivered in the first quarter.

Nvidia currently has a market cap of $5 trillion and a forward price-to-sales (P/S) ratio of 20 (as of this writing). If its P/S ratio remains constant, and if Nvidia were to generate revenue of $611 billion in 2027 -- which isn't a given -- its stock price could jump 138% to $506 per share. That would push the company's market cap to roughly $12.3 trillion.

Don't take my word for it. Beth Kindig, founder and lead tech analyst at the I/O Fund, has done the math and believes Nvidia will be a $20 trillion company by the end of the decade.

The key reason that Nvidia can reach a $20 trillion market cap by 2030 is because the company is moving its GPU generation cadence to a rapid 12-18 month cycle compared to custom silicon, which is typically on a 3-5 year cycle.

The company's relentless research and development cycle has been the driver that has kept Nvidia ahead of the competition in the race to dominate AI -- and its reign is likely just beginning.

The usual caveats

Just to reiterate, this is all fun with numbers, but it helps to illustrate that there's a long runway of growth ahead for Nvidia. Furthermore, any changes to the underlying assumptions could drastically alter the outcome.

Rivals are working feverishly to capture their share of this sizable opportunity. This comes in the form of rival GPUs, Application-Specific Integrated Circuits (ASICs), and more. That said, even if Nvidia doesn't reach that lofty benchmark next year, its growth trajectory is hard to deny.

Moreover, at just 23 times forward earnings and 16 times next year's expected earnings, Nvidia is a bargain. The accelerating adoption of AI and the company's long track record make it clear that Nvidia is an opportunity investors shouldn't sleep on.

Danny Vena, CPA has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.