Nvidia Stock To $350?

Will Nvidia stock (NASDAQ:NVDA) hit $350 in the coming years? The possibility is more than just hype. In the past six months alone, Nvidia has nearly doubled, skyrocketing from around $94 a share to almost $185.  At first glance, trading at about 42x consensus adjusted FY’26 earnings and 62x for FY’25 the stock might look pricey. However, when you consider Nvidia’s explosive earnings growth (EPS set to jump almost 50% this year), its dominant position in accelerated computing, and the massive runway for AI adoption, the valuation starts to look more reasonable. CEO Jensen Huang predicts AI infrastructure spending could surge to $4 trillion by the end of the decade and if artificial general intelligence (AGI) even partially materializes, the demand for high-performance computing could skyrocket. Below, we map out a potential path showing how Nvidia’s revenue, profitability, and valuation multiples could propel its stock to levels of above $350 per share, approaching a $10 trillion market cap.

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Image by Jacek Abramowicz from Pixabay

A Spree Of AI Dealmaking, AGI Are Long term Revenue Growth Drivers 

Nvidia’s revenues grew by almost 2x over the last 12 months, while posting an average annual growth rate of about 69% over the last three years, and the momentum can hold up. If Nvidia grows its sales at an average annual rate of say about 60% for the next two years and by roughly 45% in the third year – its revenues could move from around $131 billion in FY’25 to about $486 billion by FY’28, or almost 3.7x.

Several trends could continue to drive Nvidia’s growth. While the initial AI models deployed by companies like OpenAI in 2022 were primarily text-based, AI is increasingly becoming multimodal – processing speech, images, video, and even 3D – which demands higher computing power and a larger number of GPU shipments. Deal-making in the AI space is also showing no signs of slowing down. Over the past three months, Nvidia has struck some of its biggest AI-related deals, including a $100 billion investment and partnership with OpenAI, which covers the supply of advanced AI chips and an equity stake, a $6.3 billion backstop cloud capacity deal with CoreWeave, and Microsoft’s $19.4 billion agreement with Nebius, securing access to nearly 100,000 of Nvidia’s latest GPU chips to enhance its AI capabilities. Separately, see How SOUN Stock Falls To $2?

The next big tech revolution could be AGI – Artificial General Intelligence – and Nvidia is right at the center of it. While the timeline is not certain, the goal is to get AI to reason, plan, learn new tasks without retraining. Artificial General Intelligence could conduct scientific research, generate novel insights, or design entire products on its own. This could unlock breakthroughs and innovations across industries, and some models suggest this could push global GDP growth from low single-digits to over 20% annually. ^[1]  As the world moves closer to AGI, Nvidia could stands to benefit enormously. AGI will require enormous computing power to train and run, far beyond today’s AI models, and Nvidia’s GPUs are the industry standard for these high-performance tasks.

Net Margins Will Remain Thick

Combine this solid revenue growth with the fact that Nvidia’s margins (net income, or profits after all expenses and taxes, calculated as a percent of revenues) are on an improving trajectory – they grew from levels of roughly 25% in FY’19 to roughly 51% in FY’25 as the company witnessed better economies of scale and a more favorable product mix skewed toward complex data center products. Software-related sales are also trending higher. We can assume that margins will remain flat at current levels as Nvidia’s launch of pricier higher-end products such as the latest Blackwell chips are offset by potentially higher costs and competition in the lower-end of the market from the likes of AMD. With margins remaining flat and revenue rising 3.7x, we could see earnings rise 3.7x.

Strong Results Could Mean Earnings Multiples Hold Up

Now, if earnings grow 3.7x, the PE multiple will shrink by 3.7x to levels of about 18x, assuming the stock price stays the same. But that’s exactly what Nvidia investors are betting will not happen. If earnings expand 3.7x over the next few years, instead of the trailing PE shrinking from a figure around 62x now to about 18x, a scenario where the PE metric stays at about 32x looks quite likely. For perspective, Apple – a company that is growing at low single-digits – trades at 30x.  This would make the growth of Nvidia’s stock by about 1.9x within the next three years or so, a real possibility, translating into a price of over $350 per share. What about the time horizon for this high-return scenario? In practice, it won’t make much difference whether it takes three years or four, as long as Nvidia is on this revenue expansion trajectory, with margins holding up, the stock price could respond similarly. 

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1. The Economist [↩]