I want to explain how Nvidia can reach $1790 by 2030…
Keep in mind that the current trading price is around $416 at the time of writing this.
That would be about a 330% run from current prices!
Let’s break down how this could happen…
Current revenues for Nvidia consist of Data Center, Gaming, Professional Visualization, and Automotive.
This came out to around $26.9 billion in revenue for last year!
While this may sound impressive, it doesn’t even take into account the major revenue growth from this year…
Where did the majority of that growth come from?
1.) Data Center
All of last year’s Data Center revenues were at $15.01 billion…
This year, it will likely be north of $35 billion based on current and projected numbers!
The million-dollar question becomes: what will it look like in 2030?
To answer this question, we can look at the AI chip market growth as well as Nvidia’s current market share…
According to Next Move Strategy Consulting, the industry is expected to grow from $28.8 billion in 2022 to around $304 billion by 2030!
The crazy thing is, Nvidia has an estimated 70% of the current market share for AI chips (based on Visual Capitalist)…
I expected that Nvidia is likely to maintain most of its stronghold on the market…
Why?
Because cloud service providers and enterprise customers are not only buying into the hardware but the software as well.
This means that even if competitors such as AMD catch up on the tech side of things, they will likely still lack the full-stack solutions that Nvidia has.
Let’s make a conservative assumption though, and say that they will only keep 50% of the market share by 2030…
This means that data center revenue numbers would be around $152 billion in 2030.
While Data Center should remain the main revenue source for Nvidia in the foreseeable future, it’s likely that the other parts of the business will pick up some steam as well…
2.) Gaming
According to Precedence Research, the CAGR for the sector is expected to be around 10.5%.
Using the approximately $9 billion in gaming revenue in 2022 for the company, we can extrapolate out what it should be by 2030…
We will assume a 20% loss in market share loss to make things more interesting!
That would give us around $16 billion in revenue from gaming.
3.) Automotive
The autonomous vehicle sector only made up ~$903 million worth of revenue for full year 2022…
With that said, it is projected to expand rapidly!
With a predicted CAGR of 33.4%, I expect 2030 revenue at around $7.27 billion assuming a 20% market size reduction.
Finally…
4.) Professional Visualization
With an expected CAGR of 10.98% and 2022 revenues of $1.54 billion, this sector represents the smallest opportunity for Nvidia…
Still, it may generate a healthy $3.55 billion in 2030.
5.) Putting it All Together…
If we add all revenue sources up we get a total expected revenue of around $178.82 billion for 2030…
Now all we need to do is convert the revenue into a price target!
We can use Nvidia’s price-to-sales (P/S) ratio in order to come up with a reasonable trading price given these revenue numbers.
Using the period between October 30, 2022 and September 25, 2023, we get an average P/S of 24.74.
In the case of Nvidia, we may actually see an increase in P/S long-term as Jensen and his team are working on growing the software side of the business…
This is important because software tends to have better profit margins.
Better profit margins are likely to boost earnings, which in turn can boost the stock price…
With that said P/S ratios can vary dramatically with market conditions, so the stock price can swing significantly higher or lower from the average!
Here are all the numbers we need to calculate our price target…
We multiply our P/S ratio by the projected revenue for 2030 giving us a 2030 market cap of $4.42 trillion.
We then have to divide that by the number of shares outstanding to get the price per share…
Normally we would price in some form of dilution; however, Nvidia has a history of doing large amounts of share buybacks.
As a result, Nvidia has fewer shares now than back in 2018!
We will therefore assume the shares outstanding to stay the same at 2.47 billion.
Now for the final calculation!
Drum roll please…
Pretty darn close to the $1790 promised earlier!
It’s important to keep in mind that we don’t hold a crystal ball.
With price targets, we try our best to forecast what could happen given the data that we currently have…
While this data may change in the future, there is good reason to believe that Nvidia could reach at least $1791 by 2030…
That’s all for now!
Until Next Time,
-Damian