For folks in Suwannee County interested in tech and finance, the name Nvidia has probably crossed your radar more than once. This tech giant has seen a meteoric rise over the past year, with its market capitalization skyrocketing from $1.1 trillion to a whopping $3.1 trillion. This massive growth isn’t surprising to some, including tech investor James Anderson, who previously predicted the early success of other tech giants like Amazon and Tesla.
Anderson, a former partner at investment giant Baillie Gifford, suggests that Nvidia’s potential scale is unlike anything he’s ever seen before. He believes Nvidia could possibly reach a market cap of double-digit trillions. Of course, this is contingent on the successful implementation of artificial intelligence (AI) by customers and Nvidia maintaining its leading position in the industry.
Behind the AI boom, Nvidia has soared, creating a new class of tech millionaires. Alongside tech titans like Amazon, Google, Microsoft, and Apple, these companies collectively are worth $14.5 trillion and make up about 32% of the S&P 500. Nvidia’s data center revenue is growing at about 60%. If this trend continues, Anderson estimates that in the next decade, the company could have a market capitalization of about $49 trillion. That’s more than the entire value of every company in the S&P 500, which is roughly $45.84 trillion. He pegs the probability of this outcome at 10%-15%.
A History of Successful Predictions
Anderson’s prediction might seem lofty, but he’s been right before. Known for his go-big-or-go-home mentality, he was one of the biggest champions of Amazon’s and Tesla’s early days. 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 with Nvidia as its largest position.
When Anderson first invested in Nvidia, the company’s path to success wasn’t clearly defined. It was uncertain whether it would be a gaming, crypto, or AI company. But it had the advantage of early success, unlike Amazon and Tesla, which had to claw their way to profitability and dominance. Despite its size, Anderson still views Nvidia as a nimble entity.
Not Everyone is Convinced
Not every finance expert shares Anderson’s bullish take on Nvidia. Aswath Damodaran, a professor of finance at New York University’s Stern School of Business, believes Nvidia is riding the wave of early AI optimism. He pointed to Tesla’s similar rally in 2020, when its market cap soared, only for shares to plummet about 30% this year alone. While Damodaran acknowledges that Nvidia has the earnings to back up its high value, he argues that the expectations for the company’s future might be too high.
Deepwater Asset Management managing partner Doug Clinton also weighed in, saying it’s too early to say if Nvidia has the staying power to lead Big Tech into the AI frontier in the long term. While Nvidia’s colossal growth may seem daunting, Clinton views it as sustainable, particularly as the demand for AI is expected to increase.
As Nvidia currently dominates over 80% of the global GPU semiconductor market, it’s likely to continue its upward trajectory in the foreseeable future. The question remains: Can Nvidia maintain its dominant position providing the brains to these artificial intelligence models? Clinton believes they can, at least for the next three to five years.
