The award for earnings beat of the season so far goes to Nvidia (NASDAQ:NVDA). This company has long had a reputation as a darling of both Silicon Valley and Wall Street. But yesterday, when the chipmaker reported Q1 earnings, it blew past expectations, and NVDA stock has been skyrocketing ever since.
Its data center business is at the core of its impressive top and bottom-line earnings. Sometimes overlooked, it reached $4.2 billion after Wall Street predicted $3.9 billion. Nvidia also reported impressive beats on both revenue and earnings-per-share (EPS). It beat expectations by 10% and 19%, respectively, and said it expects to see revenue of $11 billion in Q2. There is no doubt that Nvidia is on track to be one of the year’s top blue-chip stocks. But the chipmaker also seems to be on its way to joining an even more elite club.
Few companies have reached a trillion-dollar market capitalization in recent years. Those that have stood out as behemoths of the tech sector. Apple (NASDAQ:AAPL) currently holds the largest one, at roughly $2.70 trillion, with companies such as Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) close behind. It’s hard to reach the trillion-dollar club, but Nvidia is well-positioned to become the next name to join it.
Even before Nvidia’s Q1 earnings report, speculation abounded that it could hit the trillion-dollar mark. When InvestorPlace asked ChatGPT for a list of the most likely trillion-dollar companies, it quickly highlighted NVDA stock as a viable candidate.
However, plenty of human experts have placed it in the same category, citing the wide-ranging applications of its technology and the growing demand for it. Let’s take a closer look at why Nvidia will likely be the next company to join the trillion-dollar club.
NVDA Stock: Why Nvidia Can Reach $1 Trillion
It Is Leading the Artificial Intelligence (AI) Revolution
It’s no secret that the AI boom is here, taking many stocks to new heights. While Nvidia isn’t the only company that has surged since this new technology took over, it is an undisputed market leader. It dominated the chipmaker well before semiconductors became the valuable commodity that they are now.
Now the graphics processing units (GPUs) that made Nvidia famous are a fundamental component of both the AI and metaverse booms, two fads that have transformed the tech sector in recent years. Neither is going anywhere nor is the demand for Nvidia’s products. As Nvidia still maintains the largest market share, it is in the best position to stay at the front of the AI race.
Nvidia’s Data Center Business is Booming
For all its success in the AI market, it’s important to note that Nvidia is also carving out a lucrative niche for itself by supplying chips to data centers. This is another booming market that isn’t going anywhere.
On the contrary, recent data indicates that the data center market is expected to exceed $602 billion by the decade’s end. That means Nvidia will have even more large-scale buyers to help it keep sales elevated. Revenue from data center sales rose 14% over the previous quarter, reaching $4.28 billion. That’s significantly more than analysts had predicted. If it continues growing, NVDA stock have a lucrative and reliable growth catalyst throughout the coming years.
It Has Applications for the Electric Vehicle (EV) Sector
Most investors likely associated Nvidia with AI and other parts of the tech sector. But no one should overlook that it has partnered with multiple EV producers.
Automakers are focused on perfecting autonomous driving technology, and Nvidia is helping multiple companies get there. Earlier this year, it partnered with Chinese auto conglomerate BYD (OTCMKTS:BYDDY) to bring its DRIVE Orin platform to more EVs. As the world’s leading EV producer, BYD is a great company to partner with. Previously, Nvidia extended the same technology to fellow Chinese tech producer Foxconn, owner of U.S. EV producer Lordstown Motors (NASDAQ:RIDE).
Other automakers will likely follow suit as AI helps propel the driverless race forward.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Artificial Intelligence, Consumer Discretionary, Automotive, Electric Vehicles, Semiconductor, Technology