280 Billion Reasons to Buy Nvidia Stock Now

Last fiscal year, Nvidia's (NASDAQ: NVDA) data center business developed rapidly. Leading cloud computing and AI firms use the company's AI graphics cards in large numbers.  

Data center revenue rose 217% to $47.5 billion in fiscal 2024 (ending Jan. 28, 2024). Analyst Vijay Rakesh of Japanese investment bank Mizuho recently detailed why he thinks Nvidia's data center business will continue to grow.  

Nvidia's data center revenue may grow. Mizuho expects Nvidia's data center sales to rise 87% to $89 billion this fiscal year. More crucially, Rakesh expects Nvidia's data center revenue to reach $280 billion by 2027, the bulk of fiscal 2028. That implies Nvidia's data center income may grow 56% annually over the next four years, which is likely.  

New Nvidia chips will drive this amazing increase. The business will release the H200, B100, and B200 AI processors in 2024 and 2025. Customers are waiting for these processors.  

For instance, the H200 will be ready this quarter. Nvidia expects Amazon, Microsoft, Google, and Oracle to offer cloud instances powered by these chips this year. These cloud computing companies are also interested in Nvidia's next-generation Blackwell AI processors, which the company promises will improve performance and efficiency over its Hopper design from two years ago.  

For "starting later this year," Blackwell expects "Amazon Web Services, Dell Technologies, Google, Meta, Microsoft, OpenAI, Oracle, Tesla and xAI" to embrace its platform. Nvidia claims its Blackwell platform lets enterprises "build and run real-time generative AI on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor."  

Microsoft is apparently planning to invest $100 billion on AI-focused data centers, thus Nvidia expects strong demand for its next products. On the recent earnings call, management predicted "next-generation products to be supply constrained as demand far exceeds supply."  

TSMC has helped Nvidia strengthen its supply chain. For its current flagship, the H100, the waiting time has fallen from 8 to 11 months to 3 to 4 months. TSMC plans to increase its advanced chip packaging capacity this year and expand in 2025, improving Nvidia's next-generation chip supply.  

Nvidia could meet Mizuho's 2027 data center revenue projection of $280 billion. Rakesh anticipates the AI data center market will earn $400 billion by that year, giving Nvidia 70% of the market, down from 90%.  

How much upside can the data center growth give the stock? Last year, Nvidia's gaming, professional visualization, and automotive sectors earned $13.1 billion. Mizuho estimates that Nvidia's top line may reach $293 billion in four years if these other businesses grow zero and generate the same revenue in fiscal 2028.

Due to its impressive performance in the past year, the stock is selling at 37 times sales, a premium to its five-year average sales multiple of 18. Based on the revenue projection, Nvidia's market cap would double to $4.4 trillion in four years if it trades at 15 times sales.  

However, Nvidia's other sectors change. AI offers another growth option for the game industry, which is growing quickly. So it could exceed the forecasts above and provide investors further upside. Nvidia's data center dominance means the company will outperform the market long-term, making it a top AI stock to buy even after its outstanding year.  

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