Nvidia stock, despite its already high market cap, could reach $3 trillion by 2026 if earnings and investor confidence in AI growth hold. Here’s what the path looks like.
- Nvidia stock has performed exceptionally well, reaching a market cap of $2.1 trillion. It could reach $3 trillion by 2026 if earnings growth and valuation multiples hold.
- This growth would depend on Nvidia maintaining high earnings and the market remaining confident in its future, especially in Artificial Intelligence.
- Even though reaching $3 trillion is achievable, there are risks, as strong performance is already priced in and unexpected challenges could hurt the stock.
It’s undeniable that the track record of Nvidia stock (NVDA) in recent years is extraordinary, having achieved a return of just over 1,720% in the last 5 years and reached a market cap of $2.1 trillion, surpassing Amazon (AMZN) and Alphabet (GOOG).
Not only has the performance of the stock been stellar, but the evolution of the fundamentals has too, with revenues rising from $11.7 billion in 2019 to $60.9 billion in the last 12 months.
So let’s take a look at the path for Nvidia to reach $3 trillion in market cap, bringing it closer to the two largest tech companies in the world that it has yet to overtake: Microsoft (MSFT) and Apple (AAPL).
The Path to $3 Trillion for Nvidia Stock
Although $3 trillion seems “close”, given that Nvidia is already the third largest company in the world by market cap, the company is still some $900 billion short of the mark. I believe that getting there is feasible in a few scenarios.
We can divide this market cap/stock price evolution into two fronts: (1) expansion of earnings, (2) expansion of multiples.
Currently, Nvidia is trading at around 67x earnings – i.e., an EPS of $12.90 for an Nvidia stock price of $880. The market is looking ahead and already expecting this EPS to expand. If we look at the NTM (next-twelve-month) P/E, this multiple drops to 35x, as the market is expecting an EPS of almost $25 next.
And this is just the beginning. The consensus points to an EPS of $30.40 in calendar year 2025 and $36.00 in 2026. Assuming no contraction or expansion on the 35x multiple, these figures imply an Nvidia stock at $1,063 and $1,263 respectively.
A stock price of $1,263 already means a market cap of just over $3 trillion, i.e., it would be possible for Nvidia to reach such a market cap by the end of 2026, if it all goes well.
But this exercise is very relative and the narrative plays a crucial role. The multiple of 35x earnings can be considered very expensive or very cheap, and everything will depend on how much the market expects from the company in the coming years.
For instance, if in 2026 the AI theme is still going strongly, corroborating aggressive growth projections for Nvidia, it is reasonable for the multiple to remain at high levels.
The opposite is also true: if there are challenges along the way, such as loss of market share or a slowdown in demand, even a 30x multiple may seem too high.
Let’s arbitrarily choose a number to exemplify a conservative scenario. Imagine that in 2030 Nvidia reaches an EPS of $40, and that the prospects are only “reasonable”, implying a multiple of 25x. In this context, Nvidia could trade for around $1,000, or a market cap of $2.4 trillion.
How Feasible Are These Scenarios?
The evolution of Nvidia’s earnings in 2024 is already a foregone conclusion. It’s practically a consensus that the company’s fundamentals and prospects (think margins, revenues etc.) support the idea of robust expansion for the year.
Between 2025 and 2027, the scenario is a little nebulous. As implied in the second section of this article, the market expects YoY growth of around 20% (see table below).
Source: Seeking Alpha
If we take the company’s positioning as a basis, it is plausible to project such growth. Especially considering the words of CEO Jensen Huang, who believes that AI has hit a ‘tipping point’ and still sees an evolving scenario for demand, which could come from new industries, sovereign AI, and other applications.
Considering the company overview presentation, Nvidia also considers its long-term available market opportunity at $1 trillion, divided between AI, Autonomous Machines, Data Center, Gaming and Omniverse.
Source: Nvidia’s Presentation
Even though it is plausible to project such growth, there are important risks to consider. The market consensus already expects an aggressive growth scenario and projects foward the robust margins of recent periods – so there is ‘little room for negative surprises’.
The Bottom Line
Given the above, reaching $3 trillion in market cap is not an impossible challenge for Nvidia. In fact, it is a feasible scenario that many project to be a matter of time, assuming sustained growth and rich valuation multiples.
But of course, the higher the climb, the harder the potential fall. With the bar set high, potential investors should carefully consider the risks of NVIDIA not being able to deliver on what many analysts expect of the company today.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content)
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