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Nvidia\u2019s rise has been astronomical\u2014it\u2019s grown its market capitalization from $1.1 trillion to $3.1 trillion<\/a> in the past 12 months\u2014and a tech investor who predicted the early success of Amazon<\/a> and Tesla<\/a> said this is just the beginning.\u00a0<\/p>\n \u201cThe potential scale of Nvidia in the most optimistic outcome is both way higher than I\u2019ve ever seen before and could lead to a market cap of double-digit trillions,\u201d James Anderson, former partner at investment giant Baillie Gifford, told the Financial Times<\/em><\/a>. \u201cThis isn\u2019t a prediction but a possibility if artificial intelligence works for customers and Nvidia\u2019s lead is intact.\u201d\u00a0<\/p>\n The chipmaker behind OpenAI\u2019s ChatGPT has soared thanks to the AI boom<\/a>, which has minted half a million new millionaires<\/a> who invested in the tech that has begun to revolutionize the workplace and media consumption. Nvidia, along with tech giants Amazon, Google<\/a>, Microsoft<\/a>, and Apple<\/a>, are worth $14.5 trillion and make up about 32% of the S&P 500<\/a>. With the AI darling\u2019s data center revenue growing at about 60%, Anderson calculated, should the pattern continue over the next decade, the company would have a market capitalization of about $49 trillion. That\u2019s more than the entire value of every company in the S&P 500, which is roughly $45.84 trillion<\/a>. Anderson estimated a 10%-15% probability of this outcome.<\/p>\n Anderson\u2019s projection is a lofty one, but his hunches have proved correct before. With a go-big-or-go-home mentality<\/a>, he was one of Amazon\u2019s and Tesla\u2019s biggest champions (for the EV giant, Anderson\u2019s investments were second only to CEO Elon Musk). From 2005 to 2021, Scottish Mortgage Investment Trust, managed by Baillie Gifford, saw returns of 2,240%. It invested in Nvidia in 2016. Lingotto Investment Management, where Anderson is now an investor, has a $650 million fund<\/a> with Nvidia as its largest position.<\/p>\n Nvidia didn\u2019t have a clear path to success when Anderson first began investing in the company, he said. It remained to be seen if it would be a gaming, crypto, or AI company. But it did have the advantage of early success, unlike Amazon and Tesla, which \u201cdidn\u2019t start from highly profitable and dominant positions but had to get there.\u201d In some ways, Anderson still sees Nvidia as a nimble company.<\/p>\n \u201cIt is the long duration of the development of [graphic processing units] usage in AI\u2014and not just AI\u2014from excitement, through potential pauses, to transformation of industries that is most important to us,\u201d Anderson said.<\/p>\n Other finance experts don\u2019t share Anderson\u2019s bullish take on Nvidia. Aswath Damodaran, professor of finance at New York University\u2019s Stern School of Business, argues Nvidia is riding a wave of early AI optimism.<\/p>\n \u201cThe momentum is clearly with Nvidia,\u201d Damodaran told CNBC<\/em><\/a> in May. \u201cThey can do nothing wrong. Everything they touch turns to gold.\u201d<\/p>\n Damodaran said Tesla experienced a similar rally in 2020<\/a>, when its market cap soared, peaking in 2021 at 1.2 trillion, only for shares to plummet about 30% this year alone. Meta and Google also grappled with increased competition that have loosened their grip<\/a> on the tech world. While Nvidia has the earnings<\/a> to back up its sky-high value, the expectations for the future of the company may be too steep, he argued. Damodaran said the AI chip market is not worth $1 trillion alone, and the AI market more broadly is worth about $2 or $3 trillion, meaning Nvidia would have to tap into several big AI markets to maintain and grow its value.<\/p>\n \u201cIt\u2019s clearly a possibility,\u201d Damodaran said. \u201cBut is it plausible? I don\u2019t think so.\u201d<\/p>\n It\u2019s too early to say if Nvidia has the juice to lead Big Tech into the AI frontier in the long term, Deepwater Asset Management managing partner Doug Clinton said. Nvidia\u2019s colossal growth may appear scary, but it\u2019s sustainable, particularly as the demand for AI<\/a> is expected to increase.<\/p>\n \u201cDespite all of us worrying that eventually this demand for chips will slow down, we haven\u2019t really seen that slowdown happen yet,\u201d Clinton told Yahoo Finance<\/em><\/a> last month. \u201cAnd it may take longer to slow down than we think.\u201d<\/p>\n With Nvidia making up over 80% of the global GPU semiconductor market<\/a>, the company will likely continue to ride high in the foreseeable future, Clinton said.<\/p>\n \u201cCan Nvidia maintain its dominant position providing the brains to these artificial intelligence models?\u201d he said. \u201cI think they can for the next three to five years.\u201d<\/p>\n<\/div>\n\nNot so fast<\/strong><\/h2>\n
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