Should Investing in Nvidia be Considered?
In the realm of tech investments, most folk these days are hip to AI's (Artificial Intelligence) significant role in the success of companies like Nvidia (NVDA 1.10%). This tech titan has seen its stock skyrocket over 800% since 2023, leaving many investors wondering if they missed the boat or if the ride's still worth hopping on.
While the cat's out of the bag on Nvidia's AI prowess, with the stock now trading over 50 times trailing-12-month earnings, speculation about its future growth remains high. To shed some light on the matter, I dug into the company's growth prospects.
Navigating Nvidia's AI Dominance in a Booming Market
Nvidia's domination of AI can be attributed to its Hopper AI accelerator chip architecture, which has become the industry's gold standard when it comes to training AI models. Industry reports estimate that Nvidia holds between 70% and 95% of the market, which could translate to limited room for growth within the existing competitive landscape. However, the rapid expansion of the AI chip industry might help offset any potential losses. Projected to reach USD 311.58 billion by 2029, with a CAGR of 20.4%, the global AI chip market looks ripe for the picking [1].
The robust growth of the AI chip segment, where Nvidia excels, is fueled by a few key factors. AI models will require advancements in both the number and capabilities of the chips they rely on for better performance. Additionally, increasing demand for AI services will drive the need for new computing resources to accommodate this growth.
Blackwell & Nvidia's Quest to Dominate the Future
Currently, the tech world is buzzing over Nvidia's transition to its next-gen chip architecture, codenamed Blackwell. This new technology is expected to deliver higher performance and operational efficiencies, thanks to its impressive 208 billion transistors and up to 20 petaflops of computational power [2]. Blackwell is also 25 times more energy-efficient than the H100, which translates to less money spent on hardware maintenance and operations [2].
As a result, the Blackwell chip has already garnered substantial interest from the industry. When Nvidia announced it had sold out its Blackwell capacity for 2025, it was a clear sign of thriving demand [2]. The scarcity of Blackwell chips is also expected to affect Hopper's sales, as some companies may choose to wait for the newer tech or opt for the legacy model instead [2].
Nvidia: Worth the Investment?
If the hyperscalers – the major tech companies investing in AI infrastructure – continue to expand their AI projects, the outlook for Nvidia's growth appears to be quite promising. The company's revenues and earnings could potentially double over the next five years given the market's rapid expansion.
Analysts also forecast an average annual earnings growth rate of 38% for Nvidia, which aligns with the broader growth forecast for the AI chip market. Nvidia's PEG ratio, which estimates whether a stock is undersold or overvalued relative to its expected growth, currently sits at 1.4. Given the company's strong financial performance – projected earnings per share of USD 4.43 in fiscal year 2026 – and robust future growth prospects, Nvidia appears to be a solid investment option, even at its current price [3].
So, while Nvidia's stock may have soared in the past, the tech giant continues to show strong potential for growth in the booming AI market. With its latest Blackwell architecture serving to solidify its dominance in the field, it's no wonder the investment community remains bullish on Nvidia.
In light of the robust growth projected for the global AI chip market, which is expected to reach USD 311.58 billion by 2029, many investors are considering whether Nvidia, with its industry-leading AI chip architecture, is a worthy investment. Recognizing the potential for Nvidia's revenues and earnings to double over the next five years due to the expansion of AI projects, some analysts have forecast an average annual earnings growth rate of 38% for the tech giant, making it an attractive investment option.
As the demand for AI services continues to grow and the industry requires more advanced and capable chips for better performance, investing in companies like Nvidia that excel in this space could yield significant returns.
