At the beginning of June last year, I wrote an article with an identical headline to try and find how much upside is Nvidia (NVDA 1.53%) stock capable of delivering, and I have to admit that my prediction was way off.
Shares of Nvidia have shot up 196% since that article was published last year, more than tripling in value. My estimate was that this high-flying semiconductor stock could almost double in value over a three-year period, but it exceeded those expectations by a massive margin.
NASDAQ: NVDA
Key Data Points
Let's see why that has been the case and check how much upside this high-flying chipmaker can deliver following the outstanding gains it has clocked in the past year.
Nvidia's growth has exceeded Wall Street's expectations by miles
A year ago, analysts were expecting Nvidia to deliver $42.9 billion in revenue and $7.68 per share in earnings for fiscal 2024. Instead, the company ended the fiscal year with adjusted earnings of $12.96 per share on revenue of $60.9 billion. It is also worth noting that analysts were forecasting Nvidia to deliver revenue of $50.6 billion for fiscal 2025 followed by $62.7 billion in fiscal 2026.
However, as the following chart indicates, analysts' expectations for Nvidia have simply rocketed in the past year.
NVDA Revenue Estimates for Current Fiscal Year data by YCharts
That's not surprising, as the chipmaker has been delivering better-than-expected growth quarter after quarter thanks to the massive demand for its artificial intelligence (AI) chips. For instance, in the first quarter of fiscal 2025 (which ended on April 28), Nvidia's revenue increased 262% year over year to $26 billion, and earnings increased 461% to $6.12 per share.
Such strong growth has led analysts to raise their growth expectations for the company further, as reflected in the previous chart. Nvidia CEO Jensen Huang says this terrific growth is here to stay as "companies and countries are partnering with Nvidia to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center -- AI factories -- to produce a new commodity: artificial intelligence."
Investors should note that Nvidia is playing a pioneering role in the proliferation of AI with its hardware and software offerings. The company controlled a massive 94% of the market for AI graphics processing units (GPUs) last year, and it is witnessing little competition in this space despite the efforts of its rivals. With the global GPU market forecast to post annual growth of 31% through 2032 and generate $594 billion in annual revenue at the end of the forecast period, there is room for Nvidia to keep growing at a robust pace in the long run.
Moreover, Nvidia has other catalysts beyond the AI data center market. It is the leading provider of GPUs used in personal computers (PCs) as well with an estimated market share of 88%. This puts the company in a solid position to record healthy incremental growth in the future thanks to the lucrative opportunity present in the overall GPU market.
Healthy earnings growth points toward more upside
Investors have already seen how fast Nvidia's top line is expected to grow over the next three fiscal years. The good part is that the revenue growth is set to filter down to the bottom line as well. Analysts are expecting the company's earnings to increase at an annual rate of 43% for the next five years. Based on its fiscal 2024 earnings of $1.21 per share, Nvidia's bottom line could jump to $7.24 per share after five years.
Multiplying the projected earnings after five years with the Nasdaq-100's forward earnings multiple of 29 (using the index as a proxy for tech stocks) points toward a stock price of $210. That would be a 78% jump from current levels.
However, with the trillion-dollar end-market opportunity that the company is sitting on and the rapid pace at which its end-markets, such as AI chips, are growing, it won't be surprising to see this tech stock delivering stronger gains over the next five years and exceeding the $200 Street-high price target.
