Discover the Highly Accelerated Expansion Stock, Ranking Among This Year's Leading Successes. The Firm May Reach a Mind-Boggling $50 Trillion by 2034, Predicts a Singular, Globally Acclaimed Expert.
James Anderson isn't a well-known figure, but his contributions to the investment world cannot be ignored. Spending over two decades at Baillie Gifford, he managed their premier Scottish Mortgage Investment Trust and achieved astounding growth of 1,700%. Now, he serves as a managing partner at Lingotto Investment Management.
He gained notoriety by identifying and heavily investing in some of the tech sector's notable companies, such as Amazon, Tesla, and Nvidia (NVDA 0.35%), among others. When Anderson speaks, investors would be wise to pay attention.
Earlier this year, Anderson made a daring prediction, suggesting that if the adoption of artificial intelligence (AI) continues at its current pace, Nvidia could be valued at a staggering $50 trillion within a decade. While this might appear excessive at first glance, he presents a convincing argument.
Let's delve into the factors that could propel Nvidia's value to such an unbelievable height.
AI propels this engine
There's no denying the influence AI has had on Nvidia's success over the past few years, but it's useful to refresh our memory with recent history for context. In the past 12 months alone, the company's market cap has skyrocketed from $1.2 trillion to $3.2 trillion (as of publishing) – adding a whopping $2 trillion to its value. This is thanks to Nvidia's top-tier graphics processing units (GPU) becoming the go-to choice for AI processing.
Nvidia's achievements have been remarkable. With five consecutive quarters boasting triple-digit growth percentages, it eventually ran into tough comparisons. Regardless, in its fiscal 2025 third quarter (which ended Oct. 27), the company still managed to expand its revenues by 94% year over year to $35 billion. This resulted in its diluted earnings per share (EPS) rocketing by 103% to $0.81.
During the first nine months of its fiscal 2025 (which ends in late January), Nvidia has generated revenue of $91 billion, and they're on track to surpass $129 billion for the year. Revenues of this magnitude were unthinkable just a few years ago.
For example, the $35 billion in revenue Nvidia earned in its latest quarter surpassed its total revenue of $27 billion for its entire fiscal 2023.
These phenomenal gains could just be the tip of the iceberg. The AI market could potentially be worth $15.7 trillion by 2030, according to analysts at PwC, who also pointed out that "AI is still in its infancy." If Nvidia snags even a minor slice of this addressable market, its revenues and profits could continue to soar.
Anderson estimates that demand for AI chips used in data centers – where most AI processing takes place – is currently increasing by approximately 60% per year. Assuming this growth continues at the same pace, and Nvidia can maintain its profit margins over the course of a decade, in 2034, its EPS would be around $1,350. At that point, Nvidia would be valued at around $20,000 per share, translating to a market cap of approximately $49 trillion, according to Anderson.
Another edge
There's no disputing the success Amazon and Tesla have enjoyed as investments. Amazon stock has climbed 229,200% since its IPO, while Tesla has increased by over 27,000%. Anderson highlights, however, that these opportunities were different because these companies "didn't come from highly profitable and dominant positions but had to establish themselves."
There's no arguing Nvidia's dominance. It still holds the leading share of the gaming chips market that got it started. In the calendar third quarter, Nvidia's share of the desktop GPU market climbed to 90%, and its graphics cards remain the preferred choice for gamers worldwide.
Nvidia also dominates the data center space. The company claimed a 98% market share in data center GPUs in both 2022 and 2023. With most anticipating its share price to plateau in 2024 due to intensifying competition in the AI chip market segment, it's still predicted to maintain its position as the undisputed market leader.
Aside from its market dominance, Anderson is optimistic about Nvidia for other reasons. The company's "relentless exponential progress," its competitive advantages in hardware and software, and the firm's culture and leadership are all traits they appreciate.
Is a $50 trillion market cap within reach?
It's worth running the calculations to determine if $50 trillion is an attainable target for Nvidia, despite its seemingly unattainable nature. Currently, Nvidia has a market cap of around $3.2 trillion, so it would require a stock price gain of 1,458% to reach $50 trillion.
Wall Street anticipates Nvidia to generate revenue of around $129 billion in its fiscal 2025, giving it a forward price-to-sales (P/S) ratio of about 25. Assuming its P/S remains constant, Nvidia would need to boost its revenue to roughly $2 trillion annually to support a $50 trillion market cap. Wall Street projections indicate revenue of $195 billion for the next year. Using this as a foundation, Nvidia would have to grow its revenue by 35% annually until 2034 to reach $2 trillion. Although this is an ambitious goal, it's not completely out of reach.
- Wide-spread implementation of AI falls short of expectations.
- Intense competition arises, chipping away at Nvidia's market dominance.
- Nvidia endures another setback in innovation.
- An unforeseen event transpires.
- An economic downturn surfaces.
- Disagreements or withdrawals from suppliers hinder its manufacturing process.
It may be the incorrect inquiry
Anderson was insistent on mentioning (emphasis mine), "This isn't a prophecy but a possibility if artificial intelligence benefits customers and Nvidia maintains its edge." He went on to explain that the likelihood of the company achieving such lofty heights, in his opinion, was a relatively minuscule 10% to 15%.
However, Anderson remains fixated on the larger picture. "It is the lengthy development of [GPU] adoption in AI -- and not just AI -- from enthusiasm, through potential interruptions, to the transformation of industries that is most significant to us," Anderson expressed.
There's the issue of Nvidia's valuation, which is, undeniably, intricate. Currently, it's trading at around 51 times earnings. At first glance, it appears expensive. However, trailing valuations typically don't keep pace with high-growth stocks. For instance, Nvidia's average P/E ratio over the past decade is 59, which suggests the stock is currently undervalued. Furthermore, Nvidia is also trading at about 29 times next year's anticipated earnings, which is an appealing price compared to the opportunity.
Questioning whether Nvidia could reach a $50 trillion market cap might be the wrong question to ask. Instead, investors should be contemplating whether they should invest in a market leader with a solid history of innovation, driven by once-in-a-generation secular trends, especially if they can acquire the stock at a reasonable price.
Based on those standards, Nvidia is undeniably a worthwhile investment.
In light of James Anderson's predictions, some investors might consider diversifying their portfolio to include companies strongly linked to artificial intelligence, given Nvidia's potential for significant growth.
To achieve a $50 trillion market cap, Nvidia would need to enhance its annual revenue to around $2 trillion, which, based on its current forward price-to-sales (P/S) ratio, might require a 35% annual revenue growth rate until 2034.
