Nvidia (NVDA 1.71%) stock has skyrocketed over the past few years, advancing an eye-popping 800% over three years, thanks to the company’s role in the artificial intelligence (AI) boom. As the world’s top AI chip designer, it’s generated record revenue — surpassing $130 billion in the latest fiscal year — and investors have piled into this exciting growth story.
Now, though, as Nvidia’s quarterly revenue has transitioned to double-digit growth from triple-digit, investors have been wondering if the stock will keep up its momentum. On top of that, the company faces one key challenge at the moment: U.S. controls on chip exports to China, a significant market for Nvidia.
Still, the global AI market has bright days ahead, with analysts forecasting a compound annual growth rate in the double-digits to reach more than $2 trillion over the next several years. Nvidia, as the chip leader, is perfectly positioned to benefit in this environment. Does that make Nvidia your ticket to becoming a millionaire? Let’s find out.
Image source: Getty Images.
Nvidia’s exciting growth story
First, let’s take a glance into the past and catch up on the fast-paced Nvidia story so far. This company, founded more than 30 years ago by current chief Jensen Huang, in its early days served the gaming market with its graphics processing units (GPUs). These powerful chips, with the ability to simultaneously process many tasks, soon emerged as a great tool for other industries. And in recent years, they showed their strengths in AI — and became the key to developing powerful large language models in a highly efficient manner.
All of this has translated into revenue growth for the company and a high level of profitability on sales, with gross margin exceeding 70% quarter after quarter.
As mentioned, what’s disturbed this high-growth story in recent times has been concerns about Nvidia’s future in China. The U.S. a few years ago established export controls on GPUs to be shipped to China and most recently even halted sales of the GPUs Nvidia designed specifically with these controls in mind. Another concern over the past several weeks is the U.S. plan to establish import tariffs. Right now, electronics are generally excluded, but the Trump Administration says a tariff plan for these items is on the way.
Nvidia in China
Now let’s consider Nvidia’s longer-term prospects. The China and general export situation remain challenges, but Nvidia also has been quick to take action. For example, the company has launched investments into U.S. manufacturing to reduce its reliance on exports, and two factories should ramp up in the coming 12 to 15 months, Nvidia recently said.
These investments and a lack of sales in the Chinese market could weigh on growth, but considering Nvidia’s market leadership and the fact that the U.S. is the company’s biggest market, I think this impact will be limited. It’s also important to note that Nvidia’s shift to double-digit growth from triple-digit is normal as sales have reached extremely high levels. It’s much easier to generate triple-digit growth when quarterly revenue is low.
With all of this in mind, is Nvidia your ticket to becoming a millionaire? Right now, you can get in on Nvidia for a reasonable price as the stock trades for 33 times forward earnings estimates, lower than a few months ago, and revenue continues to soar.
NVDA PE Ratio (Forward) data by YCharts
A millionaire-maker?
The stock makes a great buy for any investor who wants to bet on the AI revolution, as Nvidia is positioned to play a critical role through every chapter of development and as AI is put to use. Still, I wouldn’t count on Nvidia, on its own, to make you a millionaire. An example illustrates my point: If you invest $10,000 in the stock today, and it climbs 800% in the coming years as it did over the past three, the value of your investment would be $90,000. That’s fantastic, but far from $1 million.
Here’s some good news though: Nvidia could play a valuable role as you travel on the path to wealth. If you invest in this top tech player along with a diversified group of quality stocks and hold on to them for a number of years, you could end up with a million-dollar portfolio over the long run.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.