Nvidia's AI Lead Is Still Compounding - Can the Stock Climb From a $4.5T Base?
Nvidia (NVDA) has surged roughly 1,500% since its October 2022 low. Demand for AI accelerators keeps pushing revenue and profits higher. After topping $5 trillion in November, the market cap now sits near $4.5 trillion. The real question for capital allocators: what returns are realistic from here?
The case for continued upside: dominance with numbers you can underwrite
The AI chip market is projected to grow at a 29% CAGR through 2030, according to Grand View Research, and Nvidia is outpacing that industry rate. Source
In Q3 fiscal 2026 (ended Oct. 26), revenue reached $57 billion, up 62% year over year. Data center contributed about 90% of the total and delivered over $51 billion, up 66%. Cost of revenue rose 71% as the company scaled supply, yet net income still hit $32 billion, up 65%. Net margins near 56% give Nvidia ample room to reinvest while keeping cash compounding.
The size problem: great business, tougher math
A double from here implies a ~$9 trillion valuation. No company has crossed $6 trillion yet. That doesn't cap upside, but it does change expectations: returns will likely track earnings growth more closely than in the last three years.
Valuation sits at roughly 46x earnings versus ~31x for the S&P 500. That premium can work if earnings keep growing fast, but multiple compression is a risk if growth cools or competition closes the gap.
Who should own it at this level?
- More conservative investors: You're buying scale, strong cash generation, and clear product-market fit in AI accelerators. If you can accept a higher-than-average P/E, the combination of growth and durability can still beat the market over time.
- Growth-focused investors: You may prefer more upside optionality in smaller peers. AMD, with a market cap near $360 billion and improving AI offerings, could offer a higher ceiling with higher execution risk. AMD IR
Key signals to watch each quarter
- Data center revenue trajectory and any change in shipment cadence.
- Cost of revenue trends as supply scales (watch gross and net margin stability).
- Pricing and product mix across accelerator generations; early signs of share shift to competitors.
- Earnings growth versus movement in the P/E multiple.
Bottom line
Nvidia still has room to run because earnings are growing fast and the AI cycle remains strong. A repeat of the last 1,500% move is highly unlikely from a $4.5 trillion base, but steady compounding is plausible. Match your position size to your profile: core holding for stability and growth, or a barbell with challengers for added upside.
If you're evaluating AI adoption inside finance teams, this curated list of tools can save research time: AI tools for finance.
Your membership also unlocks:
