Key Points
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Nvidia continues to grow at impressive rates due to data centers’ ravenous demand for its compute hardware.
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The stock trades at a reasonable valuation.
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The biggest threat to the business is that the entire AI industry might be in a bubble.
- 10 stocks we like better than Nvidia ›
With a market cap of about $5.3 trillion, Nvidia (NASDAQ: NVDA) is the largest company in the world — and it’s easy to see how it reached that size. The tech giant’s advanced processors are the dominant compute hardware in the data centers that underpin the entire generative artificial intelligence (AI) industry, and as soaring demand for its chips continues to outstrip supply, it enjoys booming sales at sky-high margins.
That said, all investors know that past performance doesn’t guarantee future results. And the larger a company becomes, the harder it is for additional growth to move the needle on its finances. So what might this leading tech stock be worth by the end of 2027?
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
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Generative AI has taken the world by storm
It’s been roughly four years since OpenAI’s ChatGPT introduced the world to the power of generative AI, and the revolution that it triggered shows no signs of slowing down. According to analysts at Goldman Sachs, tech companies’ AI-related capital expenditures will total more than $1 trillion in 2026. And much of that spending will go toward graphics processing units (GPUs) and other data center compute hardware created by companies like Nvidia.
The supply of advanced semiconductor equipment remains tight relative to demand, and Nvidia’s GPUs remain the most popular data center AI accelerators, a situation that allows it to charge high prices. These persistent tailwinds were reflected in the company’s second-quarter earnings.
Revenue jumped 106% year over year to $96.2 billion, driven mostly by strength in the company’s data center segment, which grew 117%. This business involves designing and selling advanced AI infrastructure. And management plans to keep the momentum going with new releases, such as its Vera Rubin platform, which is designed specifically to handle agentic AI workloads. Nvidia’s bottom line is also looking good; the company’s net income jumped 32% year over year to $59.7 billion in the period.
What are the risks?
On the surface, Nvidia looks like the perfect stock to own. But investors should be aware that it faces some big challenges. Perhaps the biggest is its lack of diversification. In the past, Nvidia boasted a broader business model as it sold GPUs for consumer video games, machine learning, cryptocurrency mining, virtual reality devices, and data centers, among other uses. However, the mix of end-uses has condensed dramatically: Data centers now account for over 90% of its revenue.
This situation leaves Nvidia exceptionally exposed to a potential downturn in the AI market. And even the bulls should be willing to accept that the current levels of data center spending probably won’t last forever.
A recent paper by Columbia University finance professor Stijn Van Nieuwerburgh (first presented at the nonpartisan Brookings Institution) concludes that U.S. businesses and consumers will eventually have to spend the equivalent of 9% of the country’s GDP on AI-related services to justify the current levels of capital investment going toward the technology. That’s as much as we spend on food, and far more than we spend on essentials like energy and construction.
While large language models (LLMs) are useful, they are notoriously difficult to monetize due to their huge energy consumption and the intense level of competition in the space, especially from lower-cost Chinese alternatives. In fact, industry leader Anthropic reported an eye-popping net loss of $80 billion in the first half of 2026. If the consumer-facing side of the AI market struggles to turn a profit, that could eventually lead to a smaller market for hardware providers like Nvidia.
What will Nvidia stock be worth by the end of 2027?
Trading today at a forward price-to-earnings (P/E) multiple of 23.5, Nvidia stock is still relatively cheap relative to its growth potential. And investors who believe the AI boom will maintain its momentum can comfortably expect the stock to offer additional multibagger returns from here. That said, this represents the best-case scenario. And there are several reasons to be less optimistic.
The AI industry shows many of the signs that it’s in an unsustainable bubble. And Nvidia’s business model isn’t diversified enough to be cushioned against the painful impact of a spending slowdown. With these risks in mind, it looks more likely to me that when we get to the end of 2027, Nvidia shares will be trading close to flat compared to their price today.
Should you buy stock in Nvidia right now?
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Nvidia. The Motley Fool has a disclosure policy.
