Right now, Nvidia (NVDA 0.37%) is one of the most popular artificial intelligence (AI) stocks on the market, although it has taken a bit of a beating during the marketwide sell-off. However, investors don't need to consider where Nvidia is right now. Instead, they should focus on years down the road. The market is a forward-looking entity, so investors should be, too.
Nvidia CEO Jensen Huang recently predicted where the company will be in four years. While most predict that Nvidia's business will grow, few realize the potential growth in store.
Nvidia's projected growth would turn it into the largest company in the world
Nvidia makes graphics processing units (GPUs), which are suited for many tasks requiring intense computing power. Originally, they were used for processing gaming graphics, but eventually found use in other industries, like cryptocurrency mining, engineering simulations, and drug discovery. However, their biggest use case to date has been AI model training.
GPUs can process multiple calculations in parallel, making them suitable for tasks requiring a lot of computing power. They can also be combined in clusters to further amplify this effect, which is why you'll hear stories of AI hyperscalers building data centers with more than 100,000 GPUs.
NASDAQ: NVDA
Key Data Points
Nvidia holds a dominant market share in the data center GPU space, so it will receive the lion's share of the revenue from the massive AI computing power buildout. Over the past 12 months, Nvidia's data center revenue totaled $115 billion. That's an incredible amount of revenue, but according to Huang, that's just the beginning.
By 2028, he expects data center revenue to eclipse a whopping $1 trillion. For reference, Walmart produces the most revenue of any company in the world, $674 billion over the past 12 months. So, if Nvidia reached this target, it would be the world's largest company by revenue by a long shot.
Furthermore, with Nvidia's superior operating profile, it will produce the most profits by far. Apple produces the most profits of any American company, generating $126 billion over the past 12 months. If Nvidia's profit margin stays at its current level (56%) and generates $1 trillion in revenue, it would generate $560 billion in profits.
That's an astonishingly larger company than anything we know now, but is it realistic?
The growth Huang projects would mean a slowdown from its current growth levels
In fourth-quarter fiscal year 2025 (ending January 26), Nvidia's data center revenue rose 93% year over year. If Nvidia's data center revenue reaches $1 trillion by the end of 2028 (the end of Nvidia's FY 2029), it will need to put up a compound annual growth rate (CAGR) of 72%.
While a four-year 72% CAGR for a company of Nvidia's size is unheard of, it does represent a slight slowdown from its current growth rate. I'm not saying this will be easy (or that Nvidia will even achieve it), but Huang has a much better pulse on the AI industry than the rest of us, and when he speaks about monster growth, investors would be wise to listen.
If Huang's projection comes true, Nvidia will be a fantastic stock to own moving forward and will deliver market-crushing returns. But even if Nvidia only achieves half of Huang's projection, it will still be an incredibly strong stock and one that investors can't afford not to own.
As a result, I think investors should use the sale price on Nvidia's stock to buy into the stock, as these buying opportunities don't come around very often.
