The trajectory of Nvidia’s stock over the past five years has been nothing short of remarkable, rewarding investors handsomely. The company’s stock, traded under the ticker NVDA on NASDAQ, has burgeoned into a multibagger, multiplying a $1,000 investment in January 2019 into an impressive $14,550 as of the present moment.

This extraordinary surge in Nvidia’s stock price can be attributed to the exceptional expansion in the company’s revenue and earnings. Several catalysts, including the surging demand for gaming hardware, the proliferation of high-performance computing applications, the burgeoning utilization of semiconductors in automotive industry, and the emergent need for graphics cards in AI model training, have fueled this growth.

Nvidia is positioned to sustain and even amplify its returns over the next half-decade through its assertive product roadmap, which is poised to capitalize on numerous multi-billion-dollar prospects. The company has identified a $1 trillion revenue opportunity across automotive, gaming, enterprise software, and chips and systems, foretelling a potential surge in both its revenue and earnings in the years ahead.

Nvidia’s Continuously Accelerating Growth

Five years ago, Nvidia’s annual revenue stood at $11.7 billion. It’s now on track to escalate fivefold by the end of fiscal 2024, equating to a compound annual growth rate (CAGR) of 38%. Extrapolating a comparable CAGR over the ensuing five years could propel Nvidia’s annual revenue to an astounding $295 billion by fiscal 2029.

Notably, certain Wall Street analysts contemplate an even more promising future for Nvidia. Vijay Rakesh, a Mizuho analyst, anticipates that by 2027, Nvidia could amass $300 billion annually from AI chip sales alone, riding on a formidable 75% share of this rapidly expanding market. While this projection might appear audacious, an in-depth analysis of the AI chip market conveys that Nvidia indeed has the potential to achieve this ambitious milestone.

The burgeoning market for AI chips is only in its nascent stages of a substantial growth trajectory. Nvidia’s competitor, Advanced Micro Devices, estimates that by 2027, the market for AI accelerators could balloon to $400 billion, a vast leap from the previous year’s estimate of $45 billion. Despite efforts from its rivals to diminish Nvidia’s lead in this market, Citi analysts anticipate Nvidia to maintain a commanding 90% share for the next couple of years. This is attributed to Nvidia’s steadfast commitment to innovation in AI chips, which will undoubtedly fortify its grip on this market.

Nvidia is diversifying beyond the AI accelerator market, recently unveiling consumer-focused graphics cards tailored for AI applications, as well as plans to expand into devices for AI at the edge. These proactive measures align with the projected annual revenue growth of 26% through 2032, yielding $143 billion in annual revenue by the end of this period. With these initiatives in place, Nvidia is primed to capitalize on multiple catalysts, potentially steering the company’s revenue towards the $300 billion mark in the next five years, thereby promising remarkable gains for investors.

Envisioning Richer Returns for Investors

Nvidia’s five-year average price-to-sales ratio hovers around 20. Given the presumption that the company’s revenue growth will mirror its historic trajectory, it’s foreseeable that Nvidia will uphold its average sales multiple over the next five years. With a projected top line of $300 billion, this points to a staggering market capitalization of $6 trillion, significantly outstripping Nvidia’s current market cap of around $1.35 trillion.

However, Nvidia’s discounted forward price-to-sales ratio stands at 14, suggesting the potential for the company’s market cap to burgeon to $4.2 trillion based on the $300 billion revenue estimate. This paints a picture of a threefold surge in Nvidia’s stock price over the next five years, offering investors the prospect of substantial returns yet again.

Should you invest $1,000 in Nvidia right now?

Before you consider purchasing Nvidia stock, it’s imperative to take a step back and assess the company’s standing amidst the current market environment. Amidst speculation and burgeoning projections, prudence is advised.

While there are bullish sentiments shrouding Nvidia and its skyrocketing ascent, it’s critical to consider insights beyond mere hype.

The Motley Fool Stock Advisor recently spotlighted 10 top-performing stocks for potential investment, and notably, Nvidia did not make the cut. This prudent exclusion underlines the necessity to delve deeper and broaden our investment horizon. In this ever-dynamic investment landscape, wisdom often lies beyond popular narratives and fleeting trends.

The Stock Advisor service serves as a navigational tool for investors, offering vital navigational support to craft and sustain a prosperous investment portfolio. It also delivers regular analyst updates and unveils two new stock picks per month, underlining a comprehensive investment approach.

Since 2002, the Stock Advisor service has astoundingly outperformed the formidable S&P 500 by a factor of three, reinforcing the relevance of their discerning evaluations and judicious stock selections.

It’s worthwhile noting that while the siren call of rapid stock appreciation may be tempting, consulting only popular opinions or fleeting trends may lead one astray amidst the intricate labyrinth of the stock market.

Crucially, investors must not lose sight of the fact that while certain stocks might currently personify exuberance, thorough and prudent investment decisions are anchored in comprehensive research and greater market foresight.

It’s prudent to engage in a holistic evaluation, delving beyond the reverberating hype to craft an investment strategy that embraces both the present and the long haul.

It’s becoming increasingly evident that making informed investment decisions requires introspection beyond surface-level inducements, and a recurrent reminder of the sagacious advice attributed to Warren Buffett: “Be fearful when others are greedy and greedy when others are fearful.” The rhetorical question remains: amidst the euphoric crescendo surrounding Nvidia, are we fearfully disregarding substantial investment wisdom?

*Stock Advisor returns as of January 8, 2024

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.