Nvidia Joins Dow Jones Industrial Average: A Tale of Extraordinary Growth

The Dow Jones Industrial Average, the oldest stock market index in the U.S., reflects the performance of 30 significant publicly traded companies across various sectors. Often seen as a barometer for the stock market and the economy, companies qualify for the index based on criteria like revenue origins, S&P 500 membership, and reputation. Notably, Nvidia (NASDAQ: NVDA) has recently gained a spot in the Dow, marking a significant milestone in the company’s journey.

Nvidia’s Ascendancy in the Market

Nvidia joined the Dow Jones on November 8, replacing Intel, and stands out as one of only three new members this year. Over the past decade, the company’s revenue has soared by an impressive 2,300%, while its net income skyrocketed by 8,460%. This growth propelled Nvidia’s stock price up by 28,940%. Drawing from this success, Nvidia executed a 10-for-1 forward stock split, lowering its share price, which facilitated its inclusion in the Dow.

Despite Nvidia’s rapid growth trajectory, many analysts on Wall Street remain optimistic about its future potential.

Image source: Getty Images.

Innovative Origins: The Nvidia Story

Nvidia earned its reputation for creating advanced graphics processing units (GPUs), initially capturing the gaming industry’s heart. In 1999, the company innovated parallel computing in its chips, enabling them to perform multiple computations simultaneously, which transformed gaming experiences. By early 2022, gaming still represented a significant share of Nvidia’s revenue, but the company was ready for a strategic shift.

Emailing the realization in 2006 of broader applications for its technology, Nvidia’s GPUs began to be utilized in high-performance computing, machine learning, and data centers. This pivot preceded the surge of generative AI, with estimates suggesting that Nvidia holds an impressive 98% market share in data center GPUs, according to TechInsights. As AI applications grow, Nvidia’s leading role ensures its ongoing relevance.

The company has reported five consecutive quarters of astounding, triple-digit revenue growth. While a slowdown was anticipated, Nvidia’s recent fiscal 2025 third-quarter results remain impressive—record revenue of $35 billion marked a 94% year-over-year increase, along with adjusted earnings per share (EPS) skyrocketing by 103% to $0.81.

Nvidia’s management anticipates continued growth, projecting $37.5 billion in revenue for Q4, representing a 70% increase. Supply constraints remain an uncertainty, yet if suppliers ramp up production, sales could experience a significant boost.

Wall Street’s Optimism Surrounding Nvidia

Given Nvidia’s crucial role in the AI landscape, it’s no surprise that Wall Street analysts are generally optimistic. Of the 64 analysts weighing in this month, an overwhelming 94% are bullish, advising a buy or strong buy, with none suggesting a sell. The average price target hovers around $170, indicating a potential upside of 16% from Nvidia’s recent closing prices.

Rosenblatt analyst Hans Mosesmann leads the pack as the most bullish on Nvidia. Following the company’s stellar performance, he reaffirmed a buy rating and increased his price target to a high of $220, suggesting a possible 50% return for investors.

Mosesmann cited Nvidia’s remarkable quarter, robust demand for its Hopper chips, and the upcoming launch of its Blackwell architecture as key indicators for further stock growth. In fact, 15 analysts have raised their price targets based on these promising results.

While some investors may hesitate to purchase shares due to Nvidia’s high valuation of 69 times earnings and 38 times sales, Wall Street’s forecasts predict EPS of $4.36 for fiscal 2026, yielding a more acceptable forward price-to-earnings ratio of about 33 times. This valuation appears reasonable for an industry leader with significant growth prospects, making Nvidia a compelling investment opportunity.

Is Now the Right Time to Invest in Nvidia?

Before you decide to invest in Nvidia, it’s worth considering the following:

According to the Motley Fool Stock Advisor analyst team, they have identified what they believe are the 10 best stocks to buy now, and Nvidia is not currently among them. The stocks on this list have the potential for substantial returns in the future.

Reflecting on Nvidia’s past, it’s notable that if you had invested $1,000 when the company was first recommended on April 15, 2005, it could have grown to $869,885 by now.*

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Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Intel, Nvidia, and S&P Global. The Motley Fool recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.