Nvidia’s meteoric rise in the tech world has been nothing short of spectacular. In just 12 months, its market capitalization surged from $1.1 trillion to a staggering $3.1 trillion.
According to James Anderson, a tech investor who previously bet on Amazon and Tesla, this is merely the beginning.
“The potential scale of Nvidia in the most optimistic outcome is both way higher than I’ve ever seen before and could lead to a market cap of double-digit trillions,” James Anderson, former partner at investment giant Baillie Gifford, told the Financial Times.
“This isn’t a prediction but a possibility if artificial intelligence works for customers and Nvidia’s lead is intact.”
The chipmaker, known for powering OpenAI’s ChatGPT, has ridden the AI wave to new heights. The AI boom has created half a million new millionaires who invested in tech that’s reshaping the workplace and media.
Nvidia, along with giants like Amazon, Google, Microsoft, and Apple, is valued at $14.5 trillion, accounting for about 32% of the S&P 500.
Anderson’s calculations suggest that if Nvidia’s data center business revenue, growing at about 60%, continues this trajectory, the company could hit a market cap of around $49 trillion in a decade—more than the entire S&P 500, valued at roughly $45.84 trillion.
Anderson estimates a 10% to 15% chance of this scenario. Anderson’s projection might seem outlandish, but his track record speaks volumes.
He was a major backer of Amazon and Tesla, second only to Elon Musk in his investments in the latter. Under his stewardship from 2005 to 2021, the Scottish Mortgage Investment Trust saw a return of 2,240%.
Now with Lingotto Investment Management, Anderson oversees a $650 million fund, with Nvidia as its largest holding.
When he first invested in Nvidia, it wasn’t clear if it would become a gaming, crypto, or AI company. Anderson noted that unlike Amazon and Tesla, which didn’t start from dominant positions, Nvidia had early success.
He views Nvidia as a nimble entity, crucial for lon-term growth in AI and other sectors.
However, not everyone is as bullish. NYU finance professor Aswath Damodaran likens Nvidia’s current momentum to Tesla’s 2020 rally, which peaked before shares plummeted by 30%.
Damodaran argues that while Nvidia’s earnings support its high valuation, the future expectations might be overly ambitious. The AI chip market, he estimates, is not worth $1 trillion, and Nvidia would need to dominate several AI markets to sustain its value.
“It’s clearly a possibility,” Damodaran said. “But is it plausible? I don’t think so.”
Doug Clinton, managing partner at Deepwater Asset Management, offers a more measured view. He believes Nvidia’s growth is sustainable given the rising demand for AI.
“Despite all of us worrying that eventually this demand for chips will slow down, we haven’t really seen that slowdown happen yet,” Clinton told Yahoo Finance last month. “And it may take longer to slow down than we think.”
With over 80% of the global GPU semiconductor market under its belt, Nvidia’s position looks secure for the next three to five years.
As Nvidia continues to lead the AI charge, only time will tell if it can maintain its momentum and reach the lofty heights envisioned by its supporters.
You May Also Like:
