Nvidia is at the heart of the rapidly expanding artificial intelligence (AI) market, solidifying its status as a pivotal player in the industry. As the leading producer of discrete GPUs for data centers, Nvidia’s chips are essential for executing complex AI tasks, making its technology integral to major companies such as OpenAI, Microsoft, and Meta Platforms, all of which utilize Nvidia’s hardware for their latest AI advancements.
In the past five years, Nvidia’s stock has skyrocketed by approximately 1,230%. From fiscal 2020 to fiscal 2025, its annual revenue saw staggering growth at a compound annual growth rate (CAGR) of 64%, soaring from $10.9 billion to $130.5 billion. Meanwhile, the company’s adjusted gross margin increased from 62.5% to 75.5%, and its adjusted net income grew at a remarkable CAGR of 83%, climbing from $3.6 billion to $74.3 billion. These incredible growth figures have propelled Nvidia to become the world’s most valuable company, boasting a market capitalization of $4.41 trillion.
Despite the significant rise in stock price, discussions about the stock’s future remain divided, with advocates on both sides presenting their arguments.
Proponents of Nvidia continue to see immense potential, arguing that the company provides the best “picks and shovels” for the AI gold rush, with persistent demand expected to continue. Grand View Research forecasts a 31.5% CAGR for the global AI market from 2025 to 2035, driven by a growing number of companies developing innovative AI products and services. Nvidia captures over 90% of the discrete GPU market, positioning its AI GPUs as the top choice for AI applications. Its proprietary CUDA (Compute Unified Device Architecture) programming platform further cements its competitive edge by optimizing AI applications, making them primarily functional on Nvidia’s GPUs, thereby locking developers into its ecosystem.
Although AMD’s Instinct MI300X GPUs present some competition in the data center, Nvidia’s Blackwell GPUs still hold a performance advantage for most large-scale AI and high-performance computing tasks. The company has secured lasting partnerships with major clients like Amazon Web Services, Microsoft Azure, and Google’s Alphabet, creating a robust barrier against competitors.
Analysts project Nvidia’s revenue and earnings per share (EPS) to grow at a CAGR of 36% from fiscal 2025 to 2028 as it maintains its stronghold in the AI chip market. At a stock price of $183, it remains reasonably valued at 30 times next year’s earnings.
However, there are significant concerns that bear investors highlight. Nvidia faces potential risks from ongoing tariffs and trade tensions, particularly with China. The U.S. government recently restricted Nvidia’s shipping of its high-end A800 and H800 data center GPUs to China, and subsequent restrictions have impacted sales of its H20 chips. This is particularly concerning as China represented roughly 17% of Nvidia’s revenue in fiscal 2024, decreasing to 13% in fiscal 2025.
Moreover, some of Nvidia’s key clients, including Oracle and OpenAI, have recently sought deals with AMD to diversify their AI infrastructure, which could reduce their reliance on Nvidia and drive down costs. As a result, while AMD remains significantly behind, it may gradually encroach upon Nvidia’s market dominance.
Finally, the accelerated growth of the AI sector could be curtailed by stricter government regulations regarding copyright issues, workforce displacement, and privacy concerns. Should these restrictions arise alongside a general economic downturn, major AI companies might scale back their GPU procurement.
In conclusion, while the explosive growth of the past five years is unlikely to be mirrored in the coming five years, Nvidia continues to exhibit robust growth potential. The company remains well-positioned within the expanding AI landscape, although vigilance regarding competitive and regulatory challenges is necessary. As such, investors may find Nvidia’s stock appealing at current levels.
