Where Will Nvidia Be in 5 Years?

Planned spending on artificial intelligence (AI) infrastructure is through the roof, with just five companies alone projected to spend more than $700 billion (combined) in data center capital expenditures (capex) this year. Meanwhile, that spending is widely expected to continue, with Ark Invest fund manager Cathie Wood earlier this year projecting that AI infrastructure capex could hit $1.4 trillion in 2030.

One of the biggest beneficiaries from all this spending will continue to be Nvidia (NASDAQ: NVDA). The company is the dominant player in the AI chip market, as its graphics processing units (GPUs) are both the main chips to train AI models and run inference. Demand for its chips remains insatiable, which has helped the company take about a 90% market share in the GPU space.

Image source: Getty Images.

Nvidia's lead in the AI chip space comes from the wide moat its ecosystem has created. Its CUDA software platform is where nearly all foundational AI code was written and optimized for its chips, making it particularly strong in training.

At the same time, Nvidia's NVLink interconnect solution has created a huge lock-in effect, as it essentially helps its chips act as one powerful unit. Networking has actually been the company's fastest-growing segment, with revenue surging more than 3.5x last quarter to $11 billion.

Last quarter, Nvidia's overall revenue soared 73% year over year to $62.3 billion, and it sees no signs of its slowing down, with projections for revenue to grow by 77% in fiscal 2027's Q1 to $78 billion. Meanwhile, the company continues to work in lockstep with Taiwan Semiconductor Manufacturing to secure future capacity. For its part, TSMC predicted its AI revenue growth to average more than 50% annually over the next several years.

A $500-plus stock price by the end of 2030

Analysts are now projecting that Nvidia will generate $365 billion in revenue this fiscal year, representing growth of more than 65%. If it can achieve a 27.5% compound average revenue growth rate through fiscal year 2032 (essentially calendar year 2031, since its fiscal year ends in January), its revenue would be around $1.2 trillion.

If the company's adjusted operating expenses rose at an average of 8% quarter over quarter through 2031 (fiscal 2032) and gross margins remained around 72%, and we apply a 15% tax rate on its operating income, Nvidia could generate over $627 billion in adjusted earnings in fiscal 2032, or about $25.81 per share at its current share count of 24.3 billion. Place a 20-to-25 forward price-to-earnings ratio on my fiscal 2032 projections for the stock, and its share price would be between $515 and $650 in five years at the end of calendar year 2030.

Below is a basic projection of what its revenue and earnings could look like based on these estimates.

Data source: Author's projections.

With its stock currently below $200, that makes the AI stock a solid buy.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.