Nvidia Stock Can Top $400 in 5 Years If One Assumption Holds Up

Nvidia (NASDAQ:NVDA) closed at around $229 on Monday, Sept. 28, giving the artificial intelligence (AI) chip leader a market cap of about $5.5 trillion. For the stock to trade above $400 five years from now, it would have to rise around 75% from that close, or about 12% a year.

It's asking a lot of a business already this big. But I think it's a reachable target, if one assumption holds up.

Earnings are still rising fast

Nvidia's profits are growing even faster than its sales. On a non-GAAP (adjusted) basis, the company earned $2.22 per share in the fiscal second quarter of 2027 (the three months ended July 26, 2026). That was up 120% year over year and up from $1.87 in the fiscal first quarter. The adjusted number strips out gains from Nvidia's stakes in other companies, which were $7.8 billion before taxes in the quarter. Revenue, meanwhile, climbed 106% year over year to $96.2 billion, accelerating from 85% growth in the fiscal first quarter and 73% in the quarter before.

Management's guidance for the fiscal third quarter calls for revenue of around $108 billion, up about 12% over the fiscal second quarter.

Plus, Nvidia expects revenue to rise about 70% in fiscal 2028, which ends in late January 2028. And this outlook is capped by how many chips Nvidia can get made, not by demand. "Customers' forecasts point to our growth doubling next year," chief financial officer Colette Kress said on Nvidia's Aug. 26 earnings call.

Of course, margins will lose some ground. Memory costs have risen more than management expected, and gross margin, at 75% in the fiscal second quarter, is expected to be in the 72% to 73% range for fiscal 2028.

Running around 70% growth through these lower margins, I figure Nvidia could earn about $15.50 per share in fiscal 2028. Shares trade at around 15 times the earnings Nvidia is expected to report in fiscal 2028 -- a low price-to-earnings ratio for a company still growing so fast.

Nvidia needs only modest growth after 2028

Where could the stock be in 2031, then? My forecast depends on two numbers: Nvidia's earnings per share and the valuation the market puts on them.

I'm assuming 20 times earnings by then. This price-to-earnings ratio is under the S&P 500's (SNPINDEX:^GSPC) 10-year average of around 24 times earnings, and it's arguably a fair price for a giant business whose fastest growth is behind it.

At 20 times earnings, a $400 share price requires earnings per share of $20. Getting there from around $15.50 in fiscal 2028 takes about 7% annual growth in the following four years.

The buyback should cover some of that. Nvidia's board just added $150 billion to its repurchase authorization, and the business expects to spend the $235 billion now available by the end of fiscal 2028. At today's price, that could retire around 4% of its shares. But stock grants to staff add shares back, too. Nvidia's diluted share count for the fiscal second quarter was just around 1% smaller than a year before.

If the share count keeps falling about 1% each year, net income has to grow only about 5% to 6% annually after fiscal 2028.

Could fiscal 2028 be the peak?

The assumption this forecast hinges on is that Nvidia's earnings hold around their fiscal 2028 level.

After all, chip demand has always run in cycles, and Nvidia has been through downturns before. In fiscal 2023, which ended in January 2023, its revenue was flat and its net income dropped 55%. The company also depends heavily on a small group of customers. Hyperscalers (the biggest cloud computing companies) accounted for $49 billion of the $89 billion in fiscal second-quarter data center revenue.

If earnings per share dropped back to around $9 by 2031 (about where I expect fiscal 2027 to land), even 25 times earnings would put the stock near $225, a bit under Monday's close.

Yes, Nvidia is still selling about as many chips as it can make. But the shortage speaks to the next 16 months, not the years after that.

So, will Nvidia stock be over $400 in five years? I think it's more likely than not. The target calls for an ordinary valuation and single-digit profit growth after another big year, and Nvidia's own outlook already points to that big year.

I'd consider buying stock at today's price with a five-year view. But a chip downturn after fiscal 2028 might put $20 of earnings per share out of reach, and I can't rule one out.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.