Where will Nvidia stock be in 3 years?

The rise of Nvidia (NASDAQ: NVDA) has been nothing short of incredible. No company has grown as fast as Nvidia at the scale it does today. But that’s all in the past; investors want to know what the future holds for Nvidia stock.

The problem is that Nvidia’s future is extremely uncertain. Even if the company could continue its rapid growth, it could face difficulties with its core products.

Nvidia’s GPU growth has been phenomenal

Nvidia The main products are graphics processing units (GPUs). These hardware components were originally intended to quickly process gaming graphics, but their uses have expanded beyond that. GPUs can run engineering simulations, research drugs, mine cryptocurrencies, and, most importantly, train artificial intelligence (AI) models. The latter has been a major contributor to Nvidia’s rise over the past year and a half.

GPUs are a top choice for running huge workloads because they can split a computation into multiple parts and perform computations in parallel. Additionally, GPUs can be combined in a server to multiply this effect. In fact, the main limitation to building one of these powerful servers to run AI models is the size of a company’s checkbook.

AI’s explosive growth is visible in Nvidia’s data center revenue, which grew 427% year over year to $22.6 billion in its fiscal first quarter (ended April 28). Perhaps more impressive, it grew 23% quarter over quarter, showing that demand continues to grow rapidly. All else being equal, if a company grows its revenue quarter over quarter by 25%, its quarterly revenue will have more than doubled by the end of the year. Nvidia is right there, and quarter over quarter revenue is one of the best signs to look at to see if demand for its GPUs is still there.

Additionally, the biggest tech companies have told investors they plan to continue increasing spending to increase the computing power needed to meet AI demand. That bodes well for Nvidia, because it needs its customers to keep spending to stay afloat.

But there may be more to this story.

Nvidia’s profit margin hits record high

There’s an old saying: “Your margins are my opportunity.” And that could become a problem for Nvidia.

Nvidia’s gross and profit margins are at record highs, which is great for investors. But they may be too high to last. Some of its biggest customers have already developed their own chips in-house to replace GPUs in their AI computing infrastructure. That’s likely due to the high prices they have to pay for GPUs.

Take AlphabetFor example, Nvidia’s Tensor Processing Unit (TPU). When an AI workload is properly configured, the TPU can achieve much higher performance than a GPU. Given that every major cloud company has its own product, this could become a problem for Nvidia.

Nonetheless, GPUs are fantastic for running AI models and will continue to be widely used, but investors should be wary as Nvidia’s margins could…