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Nvidia (NASDAQ:NVDA) shares have risen by more than 1,000% in just two years. This incredible rally propelled the company to a valuation over $5trn a few months ago — a feat no other business has ever achieved.
As debate rages over whether we’re in a sustainable AI boom or a bubble ready to burst, this is a good time to evaluate the firm’s prospects for next year and beyond. Here’s what I think the future might hold for Nvidia shares.
The king of AI chips
Nvidia’s tremendous success is due to its current stranglehold on graphics processing units (GPUs). According to some estimates, the company controls up to 90% of the market. This near-monopoly is secured by the group’s parallel computing platform, CUDA, which allows developers to accelerate computationally intensive tasks, provided they stay within the Nvidia ecosystem.
GPUs are electronic circuits that are powering the AI revolution, significantly speeding up machine learning and deep learning models. Demand has skyrocketed as the world’s largest technology firms pour billions of dollars into AI infrastructure.
Recently, CEO Jensen Huang revealed an astonishing $500bn order book for Nvidia’s Blackwell and upcoming Rubin chips through to the end of 2026. For any investors thinking of betting against Nvidia stock, this figure alone should give them pause for thought.
What’s more, the business is at the forefront of technological developments in the fields of robotics and autonomous vehicles. Huang has described this as a “multitrillion-dollar growth opportunity.” If true, the future for Nvidia shares looks very bright indeed.
Threats to Nvidia’s dominance
Maintaining a market-leading position is a challenge for any business. That’s especially true for a company in a sector as fast-paced as the semiconductor and computing industry. China’s rapidly cementing its position as a major player in the AI arms race, and it could soon prove to be a significant commercial threat to Nvidia.
This year, Beijing banned domestic technology companies like ByteDance (the owner of Tiktok) and Alibaba from using the US firm’s RTX Pro 6000D AI chips. These were specifically designed for the Chinese market. Major players like Huawei and a variety of start-ups are working at speed to develop homegrown alternatives to rival Nvidia’s high-end chips.
Some analysts believe a significant manufacturing gap persists between Chinese companies and Nvidia. However, Jensen Huang has said the country’s only “nanoseconds behind” the US in its capabilities.
Back in January, the launch of DeepSeek — an AI model like ChatGPT — sparked a broad sell-off in US shares. There’s a risk that the emergence of a serious Chinese competitor to Nvidia in 2026 could prompt a crisis of confidence.
A lower valuation
These risks seem to be priced in at today’s valuation. Nvidia stock trades at a forward price-to-earnings (P/E) ratio below 24. That’s pretty low compared to where the shares have been historically.
At this relatively low valuation, I think Nvidia shares are still worth considering for their significant growth potential. I’ll continue to hold my position. I wouldn’t be surprised if the share price continues to climb next year and beyond.
Even if growth slows, there’s a strong chance the world’s biggest company can continue to outpace the returns of the S&P 500 and FTSE 100. But investors would be wise to monitor developments in China closely.
