Investors Eye Nvidia Amid Nasdaq Correction and AI Growth Potential
The Nasdaq Composite (NASDAQINDEX: ^IXIC) has experienced significant growth for over two years, driven by declining inflation, anticipated lower interest rates, and advancements in artificial intelligence (AI). Since the start of the bull market in late 2022, the tech-focused index has surged by nearly 95% before encountering a recent decline.
Following its peak in December, however, the Nasdaq has retreated more than 10%, entering correction territory. While such movements can be concerning, they also present a valuable opportunity for discerning investors to acquire quality stocks at reduced prices.
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One prominent option is Nvidia (NASDAQ: NVDA). Recognized as a leader in the AI surge, Nvidia’s stock skyrocketed, gaining approximately 965% over the past two years. Nevertheless, concerns regarding AI adoption rates, geopolitical tensions, and economic challenges have led to a 28% decline from its peak (as of this writing).
Despite these challenges, there is optimistic news. Analysts suggest that Nvidia could emerge as the first $20 trillion company, implying an upside potential exceeding 600%, according to some Wall Street projections.
Image source: Getty Images.
Innovation Through GPUs
Nvidia pioneered the graphics processing unit (GPU) market in 1999, transforming the video game industry. GPUs stand out due to their parallel processing capabilities, allowing for the execution of numerous mathematical computations simultaneously. This innovation enables faster completion of complex tasks.
The company soon realized that its technology could enhance various applications. Its advanced chips have become the benchmark for high-performance computing (HPC), data centers, cloud services, and, more recently, AI processing.
Moreover, Nvidia’s GPUs offer more than just performance. Its Compute Unified Device Architecture (CUDA) programming platform supports developers in maximizing GPU capabilities. Nvidia provides over 400 libraries to assist developers with building, optimizing, deploying, and scaling applications across various platforms, from PCs to supercomputers, making CUDA the industry standard.
Given its deep integration within the tech industry, CUDA is likely to maintain a leading position.
Pathway to $20 Trillion
Currently, Nvidia boasts a market cap of around $2.62 trillion, which suggests a stock price increase of 664% is necessary for the company to reach a valuation of $20 trillion. Estimates indicate Nvidia could generate close to $204 billion in revenue for fiscal 2026, resulting in a forward price-to-sales (P/S) ratio roughly around 13. To support a $20 trillion market cap, Nvidia would need to achieve an annual revenue of about $1.5 trillion.
Wall Street predicts Nvidia will experience a 50% annual revenue growth over the next five years. If the company sustains this growth trajectory, it might reach a $20 trillion market cap as early as 2031. However, several factors would need to align for this milestone to occur, making it a challenging goal.
A Positive Outlook
One analyst, Phil Panaro, founder and former CEO of Boston Consulting Group Platinion, holds a bullish perspective on Nvidia, predicting its stock may reach $800 by 2030, translating to a market cap of nearly $19.52 trillion.
Panaro presents three key factors supporting his outlook:
- Nvidia’s current AI adoption level is “less than 1%.” Even a modest increase in penetration could significantly elevate Nvidia’s value.
- Panaro estimates businesses may spend about $10 trillion on transitioning to Web 3, the upcoming blockchain-based internet. With only approximately $1 trillion spent so far, there’s a $9 trillion data center opportunity for Nvidia.
- The Department of Government Efficiency (DOGE) aims to streamline operations, potentially leading to enhanced efficiency through the use of “digital twins” in government infrastructure.
These three factors are projected to support the annual revenue growth of 50% necessary for Nvidia to achieve the $20 trillion market cap.
Potential Obstacles Ahead
While Panaro’s analysis is compelling, current market dynamics may impede Nvidia’s progress.
Identifying as a long-term Nvidia investor myself, I hold the stock as 10% of my portfolio, making it my third-largest position. I believe in Nvidia’s capacity to succeed but acknowledge that the path ahead may be bumpy.
Nvidia’s performance has mirrored broader market declines amidst lingering concerns about inflation, consumer demand, geopolitical tensions, and AI adoption rates. If these challenges persist, both the market and Nvidia may see further drops. In 2022, Nvidia’s stock fell by 66% during economic downturns, prompting many investors to exit.
This volatility underscores that Nvidia’s stock is not suited for risk-averse investors. They must prepare for the fluctuations that accompany a stock with transformative potential.
Currently, the Nasdaq’s decline presents a valuable opportunity for investors seeking Nvidia at a lower price point. The stock is trading at under 24 times forward earnings (as of this writing), a compelling valuation given Nvidia’s expansive future potential.
While Nvidia may not reach a $20 trillion valuation within the next few years, I am confident that its stock will outperform the market moving forward.
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*Stock Advisor returns as of March 10, 2025
Danny Vena holds positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. For more details, please review The Motley Fool’s disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
