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Nvidia has consistently outperformed the S&P 500 by a wide margin.
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Its AI accelerator business is still growing like a weed.
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It still looks reasonably valued relative to its long-term growth potential.
Nvidia (NASDAQ: NVDA), the world’s largest producer of discrete graphics processing units (GPUs), saw its stock surge 25,250% over the past 10 years as the S&P 500 advanced less than 180%. From fiscal 2015 to fiscal 2025 (which ended this January), its revenue rose at a compound annual growth rate (CAGR) of 39% as its net income increased at a CAGR of 61%.
That explosive growth was initially fueled by its brisk sales of gaming GPUs, which were also used to mine certain cryptocurrencies. But over the past few years, its expansion was primarily driven by its soaring shipments of data center GPUs for the artificial intelligence (AI) market.
Unlike central processing units (CPUs), which process single pieces of data at a time, GPUs process a broad range of integers and floating numbers simultaneously. That advantage makes them better suited than stand-alone CPUs for processing complex AI tasks, so the rapid expansion of the AI market generated explosive tailwinds for its sales of data center GPUs.
But since the start of 2025, Nvidia’s stock rose less than 4% as the S&P 500 stayed nearly flat. The Trump administration’s unpredictable tariffs, tighter curbs on exported chips, and the delays for its latest Blackwell chips all caused Nvidia to lose its luster. However, I believe Nvidia’s stock can stay ahead of the S&P 500 this year for five simple reasons.
Nvidia controlled 82% of the discrete GPU market at the end of 2024, according to JPR. Its closest competitor, AMD, held a 17% share, while Intel — which returned to the discrete GPU market in 2022 — controlled just 1% of the market. Nvidia also controls about 98% of the data center GPU market, according to TechInsights. The remaining 2% is split between AMD and Intel. Nvidia’s dominance of that booming market, which is supported by the widespread usage of its older A100 chips and current-gen H100 and H200 chips, makes it tough for its competitors to gain a meaningful foothold.
The global AI market could still expand at a CAGR of 31% from 2025 to 2032, according to Markets and Markets. If Nvidia merely matches that growth rate, its annual revenue would surge from $130.5 billion in fiscal 2025 to $1.31 trillion by fiscal 2032. So assuming it maintains roughly the same valuations, its stock still has a clear path toward delivering a ten-bagger gain over the next seven years.
