Where Will Nvidia Be in 10 Years?

Investors who bought Nvidia (NVDA -1.97%) stock a decade ago are now laughing all the way to the bank, as the high-flying chipmaker turned an investment of just $100 made 10 years ago into more than $13,500.

The semiconductor specialist evolved significantly over the past 10 years. From being a supplier of graphics processors for personal computers (PCs) and smartphones a decade ago, Nvidia expanded its wings into multiple high-growth markets such as automotive, data centers, cloud computing, artificial intelligence (AI), digital twins, and cloud gaming.

As a result, it won't be surprising to see Nvidia replicate its outstanding run on the stock market over the next 10 years as well.

Why Nvidia's revenue can multiply significantly over the next 10 years

Nvidia delivered annual revenue of $4.3 billion in fiscal 2013 (which ended in January 2013 and coincided largely with calendar year 2012). By fiscal 2023, which ended in January of this year, Nvidia's annual revenue increased to $27 billion. The chipmaker's revenue has increased over 6 times over the past decade.

The good part is that the chipmaker is expected to sustain its terrific revenue growth in the future as well.

NVDA Revenue Estimates for 2 Fiscal Years Ahead data by YCharts.

Nvidia's revenue is expected to jump 2.6 times over the next three fiscal years when compared to its fiscal 2023 revenue, clocking a compound annual growth rate (CAGR) of 38%. For comparison, the chipmaker's revenue increased at a CAGR of 20% over the past decade. This suggests that Nvidia is positioned to not just equal its impressive revenue-growth record of the past 10 years over the next decade but even exceed the same.

That won't be surprising as Nvidia management claims to be sitting on a massive revenue opportunity worth $1 trillion, spread across different applications.

Source: Nvidia Investor Day 2022 presentation.

Seventy percent of Nvidia's revenue opportunity will come from selling chips for various applications, and the good part is that the company dominates those segments. For instance, the company controls 84% of the market for gaming graphics processing units (GPUs), according to Jon Peddie Research. It already cornered a big chunk of the nascent cloud-gaming market as well, which has the potential to substantially boost its growth in the future.

Meanwhile, the company is also making solid progress in the automotive market by quickly building up a nice revenue pipeline. Nvidia said on its May earnings conference call that its automotive design win pipeline was worth $14 billion, up from $11 billion in the year-ago quarter. It won't be surprising to see this design win pipeline expanding further as Nvidia has built a solid partner ecosystem, and its technology is going to play a critical role in the proliferation of self-driving cars.

In terms of data center chips, Nvidia sees a $300 billion revenue opportunity in enterprise and high-performance computing. AI is going to play a key role in this segment's growth, driven by the need for chips to train AI models and for running inference applications as well. Precedence Research estimates that the AI chip market could generate annual revenue of almost $230 billion in 2032, up from just under $17 billion last year.

This market alone could give Nvidia a serious boost over the next decade as the company reportedly controls 90% of the AI chip space at present, according to Mizuho Securities analyst Vijay Rakesh. The analyst is quite upbeat about Nvidia's prospects in the market for AI chips, pointing out that the company could generate $300 billion in AI-specific revenue by 2027 even if its share of this market dips to 75%.

How much upside can investors expect over the next decade?

Nvidia could achieve faster revenue growth in the coming decade than the 20% CAGR it has clocked in the past 10 years. While analysts have ambitious growth targets, let's assume Nvidia's top line increases at an annual rate of 25% over the next decade. That would translate into annual revenue of $250 billion after 10 years, using its fiscal 2023 revenue as the base.

Nvidia has a five-year average price-to-sales ratio of 18.4. Assuming that multiple drops down to 10 after a decade, the company's market cap could jump to $2.5 trillion over the next 10 years based on revenue projections. That would be more than double Nvidia's current market cap. However, it won't be surprising to see this semiconductor stock deliver an even bigger upside since it could grow at a faster pace thanks to the trillion-dollar revenue opportunity it is sitting on.