Spending on artificial intelligence (AI) infrastructure is expected to continue rising in the coming years. The world’s leading semiconductor foundry, TSMC, forecasts that its AI chip revenue will maintain a high growth rate of 50% annually until 2029. Meanwhile, Ark Invest fund manager Cathie Wood recently predicted that data center capital expenditure could potentially triple by 2030, reaching approximately $1.4 trillion. This paints a broad growth landscape for NVIDIA (NVDA), a leader in the AI chip sector.
NVIDIA’s graphics processing units (GPUs) are the core hardware driving AI workloads. With its CUDA software platform and network product portfolio, the company dominates the AI chip market, holding a market share of about 90% in the GPU segment. Cathie Wood pointed out that networking is one of the fastest-growing components of AI infrastructure, and NVIDIA’s networking business performance confirms this trend. Last quarter, its networking product revenue surged 162% to $8.2 billion, far outpacing the growth rate of its computing business.
Based on the current growth trajectory, a projection for NVIDIA’s long-term stock price can be formulated. The company expects revenue for the recently concluded fiscal year to reach $213.4 billion. Assuming it can maintain a compound annual growth rate (CAGR) of about 37.5% until 2031 (corresponding to fiscal year 2032), its revenue could potentially climb to around $1.4 trillion by then. This implies revenue growth of about 50% next year, slowing to 25% in fiscal year 2032.
Further assuming that by 2031, the company’s adjusted operating expenses maintain a quarterly growth of about 7%, the gross margin stabilizes around 73%, and a 15% income tax rate is applied, then NVIDIA’s adjusted earnings could exceed $792 billion. Based on the current total outstanding shares of approximately 24.3 billion, earnings per share would be around $32.50. If a forward price-to-earnings (P/E) ratio of 20 to 25 is applied for fiscal year 2032, its stock price by the end of 2030 could potentially be in the range of $650 to $815. This potential outlook suggests that NVIDIA stock remains attractive at its current levels.
However, the path to growth is not without its twists. Recent reports indicate that investment talks worth up to $100 billion between NVIDIA and the renowned AI research organization OpenAI have stalled, revealing potential disagreements among industry leaders. It is understood that the impasse is partly due to skepticism within NVIDIA regarding the deal. In September last year, both parties announced a strategic cooperation intent. This massive investment was originally planned for building new AI infrastructure, such as data centers based on NVIDIA components, targeting a computing power scale equivalent to the peak electricity consumption of New York City.
In a statement, NVIDIA said it has been OpenAI’s preferred partner over the past decade and looks forward to continuing the collaboration, but declined to comment on the progress of the negotiations. OpenAI did not respond. Reports indicate that both sides are reassessing the form of cooperation, with one possibility being an investment of tens of billions of dollars by NVIDIA in OpenAI’s current funding round. This funding round aims to raise $100 billion. Previously, there were reports that Amazon (AMZN) was in talks to invest up to $50 billion.
NVIDIA’s investment activities extend beyond this. The company recently announced an additional $2 billion investment in cloud computing service provider CoreWeave (CRWV), which is also an NVIDIA customer. This pattern of investing in entities that purchase its products has sparked discussions in the market about whether “circular transactions” exist in the AI industry boom and about its sustainability. Regarding this, NVIDIA’s CEO Jensen Huang dismisses the notion. He stated after announcing the additional investment that such investments constitute an extremely small portion of the total financing required by enterprises, arguing that the idea of “circular transactions” is unfounded.
In summary, despite facing uncertainties in specific partnerships and scrutiny over its investment strategy, NVIDIA’s core position and growth momentum in the AI infrastructure sector remain solid, providing fundamental support for the long-term upward trajectory of its stock price.
