Nvidia (NVDA 0.83%) stock may have lost nearly half of its value in 2022, but investors shouldn't forget that the graphics specialist has been a big winner over the past decade. Shares of Nvidia have gained more than 4,800% in the last 10 years. For comparison, the S&P 500 has appreciated just 190% over the same period.
But can this semiconductor bellwether remain a top investment over the next decade as well? To find out, we will have to take a closer look at the potential catalysts that could drive Nvidia's growth over the next 10 years and check if they are strong enough to give a significant lift to its top and bottom lines.
NASDAQ: NVDA
Key Data Points
Nvidia's diversification has opened massive opportunities
Nvidia has come a long way in the past 10 years. This is evident from the terrific growth in the company's revenue over this period.
In fiscal 2012, Nvidia reported annual revenue of $4 billion. The company was selling graphics processing units (GPUs) for personal computers (PCs), workstations, smartphones, and tablets at the time. Cut to fiscal 2022 and it becomes evident that Nvidia has grown at a fantastic pace over the years, as it reported record annual revenue of $27 billion.
The company still sells GPUs for the PC and workstation markets. But the growing application of these chips in new verticals such as data centers, automotive, cryptocurrency mining, and digital twins has unlocked a massive addressable market for Nvidia. Data centers, for instance, have become a very important market for the company, as GPUs play a key role in accelerating diverse workloads related to artificial intelligence (AI), machine learning (ML), high-performance computing, and now the metaverse.
The data center business produced $10.6 billion in revenue for Nvidia last fiscal year, an increase of 58% over the prior year. And the segment is on track for another solid year. Nvidia reported $3.6 billion in data center revenue in the first quarter of fiscal 2023, an annual run rate of over $14 billion that points toward 40% growth over last year.
It would be safe to say that the data center business is just getting started. The data center GPU market is expected to hit $26 billion in annual revenue by 2026 as per third-party estimates. However, this is not the only addressable opportunity for Nvidia in the data center space. The company is going to jump into the data center CPU (central processing unit) market as well next year with the launch of its Grace chips. This move is going to unlock another massive opportunity for Nvidia, as the server CPU market is expected to be worth almost $18 billion in 2026.
The automotive market is another area where the adoption of GPUs has unlocked a multibillion-dollar opportunity for Nvidia. The company has $11 billion worth of design wins in the automotive space that could turn into revenue over the next six years once manufacturers start deploying its chips into vehicles.
Meanwhile, Nvidia's GPUs are also being used to create digital twins, which are three-dimensional virtual representations of real-world objects. The likes of Kroger, PepsiCo, and Siemens have already partnered with Nvidia to improve the efficiency of their operations using digital twin simulations. It wouldn't be surprising to see more companies tapping Nvidia's digital twin platform in the future, as the adoption of this technology is expected to increase at an annual pace of 35% through 2027.
In all, Nvidia sees a total addressable opportunity worth $1 trillion in the long run across the multiple end markets that it is serving. Gaming is expected to produce just 10% of that opportunity, while the likes of automotive chips and data center chips, systems, and software could open a $600 billion market for the company in the future.
Is now a good time to buy?
Nvidia's multiple catalysts indicate that it is set up for terrific growth over the next decade as well. So it wouldn't be surprising to see this tech stock soar higher and beat the broader market as it has done in the past.
However, investors looking to benefit from Nvidia's future growth will have to pay a rich valuation to buy the stock. Nvidia is trading at 40 times trailing earnings, which is higher than the Nasdaq-100's multiple of 25. But the near-term headwinds that Nvidia faces could send the stock lower. Investors could get an opportunity to buy Nvidia stock at a relatively cheap multiple, and they may not want to miss the chance given the solid growth drivers that could supercharge its top and bottom lines over the next decade.
