Nvidia (NVDA +3.97%) has been one of the most successful companies in recent memory. It pivoted from gaming to focus on the potential implications of artificial intelligence (AI) — long before the technology went viral. Nvidia’s graphics processing units (GPUs) cornered the data center GPU market by providing the computational horsepower needed to underpin these next-generation algorithms.
Concerns about a potential AI “bubble,” slowing adoption of the technology, and increasing competition had driven Nvidia down by as much as 20%. However, a recent rebound in investor sentiment has sent the stock to a new record high. When the market closed on Monday, Nvidia’s market cap climbed to $5.2 trillion.
This leaves investors asking the quintessential investing question: Is it too late to buy Nvidia stock? Let’s see what the evidence suggests.
Image source: Nvidia.
It’s all about the data center
Unless you’re a computer guru, you may not be familiar with the term parallel processing. In simplest terms, this is the process by which a computationally intensive task is divided among the many “cores” or processors in a GPU. By taking a large workload and breaking it down into smaller, more manageable tasks, the GPU makes short work of tasks once considered impossible.
Data centers are the epicenter of AI workloads, harnessing the power of legions of GPUs working in unison. While estimates vary, Nvidia controls as much as 92% of the data center GPU market according to IoT Analytics.
The data center spending boom is expected to continue for at least the next five years, with total capital outlays of $7 trillion by 2030, according to McKinsey & Company. The biggest cost of these data centers is the GPUs that power them. In fact, about 39% of total data center spending is dedicated to GPUs, according to a report by Business Insider.
Taken together, that suggests there’s a $2.5 trillion opportunity over the coming five years that’s Nvidia’s for the taking.
Today’s Change
Current Price
Ringing the cash register
Nvidia continues to reap the rewards of its decision to focus on AI. For its fiscal 2026 fourth quarter (ended Jan. 25), the company delivered revenue of $68.1 billion, which climbed 73% year over year and 20% sequentially. Its gross margin expanded 170 basis points to 75.2%. This drove adjusted earnings per share (EPS) up 82% to $1.62.
For its fiscal 2027 first quarter (ended April 27), management’s outlook calls for revenue of $78 billion, representing about 77% growth. However, that could be just the tip of the iceberg.
At Nvidia’s GPU Technology Conference in March, CEO Jensen Huang stated the company will generate “at least” $1 trillion from the sale of Blackwell and Vera Rubin chips by the end of 2027. “In fact, we are going to be short,” Huang said. “I am certain computing demand will be much higher than that.”
Assuming Huang’s estimate is accurate — and we have no reason to believe it isn’t — Wall Street is woefully underestimating Nvidia’s potential over the next couple of years. Analysts’ consensus estimates call for revenue of $371 billion in fiscal 2027 (calendar 2026) and $484 billion in fiscal 2028 (calendar 2027). That works out to a total of $855 billion over 2 years, falling far short of Huang’s $1 trillion estimate.
It also falls far short of the $2.5 trillion data center opportunity highlighted above.
Is it too late?
I’ve previously sketched out a path for Nvidia’s market cap to exceed $7 trillion by the end of 2026. Furthermore, despite its recent rebound, Nvidia is selling for just 26 times forward earnings, an attractive valuation for a company growing revenue and profits by high double digits.
Based on what we know now, I would say it’s not too late to buy Nvidia stock. Moreover, if Nvidia weren’t already my biggest holding, I would likely buy more.
