Nvidia shares are up nearly 2,800% over the past five years, but can the company continue to make these gains?
Chip and data center specialist Nvidia (NVDA 3.13%) has emerged as the king of the artificial intelligence (AI) domain. Quarter after quarter, the company continues to defy expectations, setting revenue and profit records and providing investors with a laundry list of such good news that it’s hard to keep track of it all.
If you’ve held Nvidia stock at any point in the last two years, congratulations. You probably made a lot of money.
But as I often say in my pieces, investors need to think long term. Can Nvidia’s rocket ship keep climbing higher?
Below I will outline the catalysts And risk factors facing Nvidia. Additionally, I’ll detail how I think these points could impact the stock and assess how Nvidia stock can hold up over the next five years.
The next few years look great, but…
One of Nvidia’s best-selling products right now is the H100 graphics processing unit (GPU). Metaplatforms CEO Mark Zuckerberg and Tesla CEO Elon Musk has both specifically referenced the importance of the H100 technology for the generative AI development of their respective companies.
But despite the relentless demand for the H100, Nvidia is already on the eve of a successor chipset. The company’s new Blackwell GPUs will launch later this year, and both Wall Street and Nvidia’s own management are predicting billions of dollars in additional sales by the end of the year.
In addition, heavy expenditure on capital expenditure (capex) from Meta, Tesla, Microsoft, AmazonAnd Alphabet should be a nice tailwind for Nvidia’s computing and networking business.
With all that in mind, Nvidia stock could be poised to post further gains in the coming years once Blackwell really hits its stride.
Image source: Getty Images.
The longer-term picture is bleak
An important detail to mention regarding the higher capital expenditures of large technology companies is that not all of this will be allocated to Nvidia’s products. Instead, each of the “Magnificent Seven” members mentioned above is working on their own custom chip designs. In other words, Nvidia’s own customers want to compete with the company and move away from over-reliance on IT infrastructure.
Such dynamics will likely be a headwind for Nvidia in terms of its pricing power. I suspect lower prices for Nvidia’s GPUs will hurt revenue growth and gross profit margins. As revenue growth begins to normalize and margins begin to shrink, Nvidia’s profitability profile will tighten.
As a result, increasing competition could be the catalyst that ultimately leads to a plateau in Nvidia’s entire business. For these reasons, I think the stock has a good chance of selling in the long term.
The bottom line
I want to make one thing abundantly clear: Nvidia stock likely has a solid runway ahead of it. However, as I’ve said before, I think timing will become a more important factor in whether or not we should buy or sell Nvidia stock.
NVDA data by YCharts.
In other words, I don’t think Nvidia stock will rise another 2,800% in the next five years. Although the stock price will sometimes rise, it is very unlikely that shares will rise in a straight line and experience minimal sell-off.
Frankly, I think this dynamic has been central to Nvidia’s sales of several high-profile billionaires lately.
Will Blackwell and everything else Nvidia releases in the next five years be successful products? Probably. But will they be so successful that Nvidia will remain king of the AI realm, while the rest of the tech world will be lucky enough to get their hands on the company’s products? I don’t think that will be the case.
For these reasons, I think Nvidia’s valuation will normalize over the next five years, and the stock may underperform its peers and the technology sector in general. I think there are more compelling opportunities in the chip industry and the AI space more broadly. I would think long and hard before doubling down on a position in Nvidia in the next few years.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
