With a $3.8 Trillion Market Cap, Does Nvidia Really Still Have Room to Grow?
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Nvidia (NVDA 1. 74%) is the largest publicly traded company, with a market cap of $3. 8 trillion on Friday afternoon, and a stock price that's just below its all-time high. Nvidia's...
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June 28, 2025
06:22 PM
The Motley Fool
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Nvidia (NVDA 1. 74%) is the largest publicly traded company, with a market cap of $3. 8 trillion on Friday afternoon, and a stock price that's just below its all-time high
Nvidia's growth story has been nothing short of extraordinary
Revenue has grown by nearly 400% over the past two years as AI investment activity has exploded, and that's after an already extremely impressive multidecade history
If you don't already own Nvidia, is it too late to invest
With an estimated 95% of its most important end and nearly $150 billion in revenue over the past four quarters, it's easy to understand why Nvidia's upside from here might appear limited
But I'd argue the opposite
Not only do I think Nvidia's revenue could get much larger from here, but the stock could duce market-beating returns for many years to come
Image source: Getty Images
Nvidia has more growth potential than you might think Nvidia has four main segments: data center, gaming, fessional visualization, and automotive
The data center segment is by far the most important
In simple terms, AI-focused applications require a tremendous amount of data cessing ability, and Nvidia's data center accelerator ducts are widely considered to be the gold standard
As mentioned, the company has a dominant (estimated) 95% market
And the industry itself is growing rapidly
Over the past year, Nvidia's data center segment sales tripled, and the $120 billion global market for data center accelerators is expected to roughly double over the next five years
Data center capital spending -- mostly by large companies -- is expected to reach $1 trillion annually in just three years, compared to $500 billion today
In other words, if Nvidia simply maintains its dominant market, the largest and most critical part of its could double or more in size by 2030
The company's other segments have lots of room to grow as well
The automotive segment is a big opportunity, as advanced autonomous vehicle nology is still in the early stages of evolution, and Nvidia already has 20 of the top 30 EV manufacturers on its customer roster
In fact, GPUs for automotive applications is expected to be a $45 billion market by 2030, and Nvidia also develops software systems, safety systems, and more for automotive applications
Capital allocation and a reasonable valuation Nvidia's free cash flow hasn't been anywhere near the current level for long, but now that the company is generating boatloads of cash, management is allocating it in holder-friendly ways
The company does pay a quarterly dividend, but it's a minuscule one (0. 03% yield), at least for now
But buybacks are becoming an increasingly large focus of management
In the first quarter, Nvidia spent more than $14 billion on stock buybacks, which was more than half of the company's free cash flow
However, keep in mind that Nvidia's free cash flow grew by 75% year over year, and is expected to grow rapidly for at least the next few years, so it wouldn't be surprising to see buybacks expand along with it
Finally, Nvidia is not a cheap stock, trading at 48 times trailing 12-month earnings and 34 times sales
But it isn't necessarily an expensive one
Nvidia's revenue growth (both past and jected) ly justifies a higher P/E ratio
Analyst estimates call for 44% year-over-year earnings growth in the current fiscal year (ending January 2026) and another 34% in the ing year
Plus, the combination of this growth rate and Nvidia's stellar margins (net margin over 50%) warrant an elevated price-to-sales multiple
In fact, by some metrics, such as the price/earnings-to-growth (PEG) ratio, Nvidia stock looks rather attractive right now
The bottom line is that a combination of a growing market opportunity, holder-friendly capital allocation, and a reasonable valuation could allow Nvidia to continue to grow and duce excellent returns for years to come
Matt Frankel has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Nvidia
The Motley Fool has a disclosure policy.
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