AI still has a lot of room to grow, and so does Nvidia (NASDAQ: NVDA), the company that dominates the massive AI chips market. In fact, Nvidia’s data center business, which includes the company’s H100 chips that are widely used to power generative AI apps like ChatGPT, has been growing at an astounding rate, and in the most recent fiscal year, Nvidia’s data center revenue skyrocketed a whopping 217% to $47.5 billion.
Nvidia investors might be happy to know that this is just the beginning for the company. According to analyst Vijay Rakesh of Japanese investment bank Mizuho, this segment’s astonishing growth is set to continue, at an even more astonishing pace. That’s not everything, because he predicts that the company will reach a $4.4 trillion market cap in just three years, and since Nvidia’s current market cap is around $2.2 trillion, he’s basically saying that the company will double its market cap by 2027.
Mizuho’s NVDA Stock Predictions
NVDA stock is trading at around $882, and while this is an impressive 83% gain year to date, it’s a decrease of around 7% from the $950 it reached in March. But, this dip could be a great buying opportunity, according to analysts who are still bullish on the stock, and one of them is Mizuho’s Vijay Rakesh.
According to Rakesh, Nvidia’s data center revenue in the current fiscal year could jump 87% to about $89 billion. Not only that, but he also predicts that data center revenue could jump to $280 billion by 2027, which will coincide with the company’s fiscal 2028. This means that Nvidia’s data center revenue could increase at an annual rate of 56% over the next four years.
Rakesh believes that Nvidia’s future growth will be driven by the company ramping up the production of its new chips, the H200, B100, and B200 AI chips, which are expected to launch later in 2024 and 2025. This isn’t just wishful thinking, because many customers are already lined up for Nvidia’s new products. For instance, the H200, which will be available in Q2 of this year, already received orders from companies like Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG), and Oracle (NYSE: ORCL).
Nvidia said that these companies are expected to launch cloud instances powered by the H200 chips later this year, but that’s not all, because many cloud computing giants have also expressed interest in Nvidia’s next-generation Blackwell AI chips. Nvidia says that its next-gen Blackwell chips will deliver mind-blowing performance improvements, which will allow organizations to build and run real-time generative AI on trillion-parameter large language models, while using 25x less cost and energy consumption than their predecessors.
The Blackwell products should be available later this year, and they also have big names lining up for them. Nvidia says that it expects companies like Amazon Web Services, Dell (NYSE: DELL), Google, and Meta (NASDAQ: META) to adopt this new platform. In addition to these companies, Oracle and Microsoft will join in, and Nvidia even expects Tesla (NASDAQ: TSLA) and xAI to start adopting the Blackwell platform as well.
Recently, it was reported that Microsoft and OpenAI are looking to spend a staggering $100 billion on building an AI data center project, and this could greatly benefit Nvidia because the company is the market leader when it comes to AI chips, and that’s another reason to be bullish on Nvidia’s data center business.
Can Nvidia Meet the Demand?
Many people in the tech industry, including Tesla’s CEO Elon Musk, have said before that acquiring Nvidia’s chips is extremely hard, thanks to the really high demand. But Nvidia has a solution to this problem, as it’s been working overtime with manufacturing partner TSMC (NYSE: TSM) to significantly ramp up production capacity. For example, wait times for Nvidia’s current H100 chip have already dropped from 8 to 11 months down to just 3 to 4 months.
TSMC is aiming to double its advanced chip packaging output this year, with even more expansion planned for 2025. Therefore, it looks like the supply of Nvidia’s next-gen chips will continue improving to keep up with the explosive demand. That way, Nvidia could actually reach the $280 billion data center revenue in 2027. Rakesh also said that he expects the overall AI data center market to generate $400 billion in revenue by that year, which means that Nvidia would control 70% of the market.
It’s important to note that Mizuho increased its NVDA stock price target back in March to $1,000 from $850, and currently has a “Buy” rating on the stock. Since Nvidia is currently trading at $882, this is an impressive upside of 13.3%, meaning that the investment bank is extremely bullish on the company.
What’s Next for Nvidia?
Analysts think that NVDA stock is currently down thanks to investors taking profits, but the company is exerting a lot of efforts to bring its stock back up again. It was recently reported that Nvidia will partner up with Indosat, a telecommunication provider in Indonesia, to build a $200 million AI data center in the country, which will help foster the development of technology infrastructure in Indonesia.
A recent Oppenheimer note said that demand for AI in Asia will jump over 40% this year, and that this plays right into Nvidia’s strengths. Therefore, maybe this Indonesian data center partnership is the beginning of this, and Asia will add so much more to Nvidia’s data center revenues over the next few months.
The company also has thriving gaming, auto, and visualization divisions. Last year, these other segments brought in $13 billion in revenue, but even if we assume zero growth in these segments going forward, just steadying out at $13 billion per year, Nvidia could still hit around $293 billion in total revenue by 2027 based on Mizuho’s data center projections.
The stock is currently trading at 37x sales, a premium to its five-year average sales multiple of 18, thanks to the phenomenal growth it has delivered in the past year. But here’s the thing – even if Nvidia drops to 15x sales in four years, its market cap would increase to $4.4 trillion based on Mizuho’s revenue outlook for the company.
Realistically speaking, Nvidia’s other businesses won’t stagnate at all anytime soon. The gaming and automotive industries are embracing AI more and more each year, opening up new opportunities. The company is also investing heavily in other industries like healthcare, so chances are, Nvidia blows past the projections and delivers even more upside.
When you take a step back and look at the big picture, Nvidia’s dominance in data centers makes it one of the most promising AI stocks for the long-term. Even after its incredible run over the past year, Nvidia still seems poised to beat the market in the years ahead. For investors who can handle the current volatility, NVDA stock could remain a top tech stock to buy and hold for the AI revolution playing out.
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