What are the exact reasons why INVISTA's share price will double again in the next 5 years?

INVISTA (NASDAQ: NVDA)It took about seven months to translate the value. In the seven months prior to that, the company's share price had also doubled. In my opinion, it is highly unlikely that Nvidia will be able to achieve another 100% return in the next seven months.

However, if the time frame were longer, the situation would be different. Here are the exact conditions for Nvidia's stock price to grow again over the next five years.

GPU demand surges

The most important factor in determining whether Nvidia's stock price will increase in five years is the law of supply and demand. In a nutshell, this law states that if supply decreases and/or demand increases, prices will rise, and vice versa. In the case of Nvidia, the supply and demand for its stock is directly related to the supply and demand for its graphics processing units (GPUs).

Let us first talk about the demand-side noodles of the equation.

The biggest driver of demand for Nvidia's GPUs over the next five years will almost certainly be artificial intelligence (AI). Markets and Markets estimates that the global market for AI chips will grow at a compound annual growth rate of 20.81 TP3T. Another market researcher, The Brainy Insights, estimates a compound annual growth rate of nearly 38.21 TP3T.

Even if we use a lower estimate, demand for Nvidia GPUs will soar above 250% over the next five years. All the company has to do is at least keep pace with the entire AI chip market. Considering Nvidia's current market-leading position, that shouldn't be a problem.

But is the level of growth in the AI chip market predicted by market researchers realistic? I think so. Generative AI and self-driving car hailing services are just getting started. Both will continue to grow rapidly over the next few years. In addition, we can't rule out the possibility that major breakthroughs in artificial general intelligence (AGI) will drive increased demand for powerful AI chips.

Supply-side economics

Now, let us talk about the supply side noodles.

Nvidia's economics are simple: Nvidia's GPUs will dominate the market as long as there aren't enough alternative suppliers of AI chips to meet customer demand. I think this may be a bigger challenge for Nvidia than growing demand.

Several companies are trying to capture Nvidia's market share.Advanced Micro Devices(math.) andIntel Nvidia has introduced new AI chips that they believe are more cost-effective than Nvidia's flagship H100 GPUs. a number of Nvidia's large customers have developed their own chips to reduce their reliance on Nvidia, including Google parent companyAlphabet respond in singingAmazon The

However, increased competition doesn't mean that Nvidia's stock price won't increase over the next five years. As long as demand for Nvidia's GPUs grows fast enough, it doesn't matter how much market share the competition takes.

For Nvidia, the best way to stay at the forefront of silicon is to outperform everyone else, and Nvidia is clearly striving to do just that, as evidenced by the company's recently introduced next-generation Blackwell platform, which it says can "run real-time generative AI on trillions of petabytes of large-scale linguistic models at up to 25 times less cost and power consumption than previous-generation products. up to 25 times less than previous-generation products".

The biggest obstacle to Nvidia's translation opportunities

In this discussion, I've intentionally ignored the biggest obstacle to Nvidia's growth over the next five years, which is valuation. That's valuation; Nvidia's current stock price is 35.6 times sales. This multiple reflects a high level of confidence ina big marginThe growth is expected.

Aswath Damodaran, a professor of finance at New York University and known as the "Dean of Valuation," puts Nvidia's fair value at $436, assuming compound annual revenue growth of 32% over the next five years. Nvidia's current stock price is more than twice that figure Nvidia's current stock price is more than double that figure. If Damodaran's judgment is correct, it is more likely that Nvidia's share price will be halved than doubled over the next five years. However, Damodaran also admitted that he may have underestimated the demand for Nvidia chips.

However, there is one key element of total mass that is not always included in valuation models, and that is investors' expectations of growth beyond the timeframe used in the model. I believe that if demand for Nvidia's GPUs exceeds expectations and the company's ability to innovate beyond its competitors, the company will be able to grow beyond the timeframe used in the model.(not only ...) but alsoInvestors believe that these trends will continue for more than five years, and then Nvidia's share price will increase in the next five years.

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The exact reason why INVISTA's stock price will translate again in the next 5 years was originally published by The Motley Fool.