Nvidia Corp. (NASDAQ:NVDA) is worth over $5 trillion after another year of explosive growth, but NYU Stern finance professor Aswath Damodaran says the stock still asks investors to assume an extraordinary payoff from the artificial intelligence boom.
“Nvidia is an awesome company, but it’s being priced as the greatest company ever,” Damodaran said on the BiggerPockets Money podcast Tuesday.
Damodaran bought Nvidia in 2018 at a split-adjusted $1.80 a share and later sold down the position in stages, with Benzinga reporting in January that he had fully exited. Nvidia now trades at more than 100 times his original cost basis.
The AI Revenue Bar Gets Higher
In January, while discussing investment in large language models, Damodaran said AI would eventually need roughly $2 trillion to $4 trillion in revenue to justify the capital pouring into the sector.
His new estimate is much larger, though it covers the broader AI infrastructure buildout.
Damodaran puts current AI product and service revenue at roughly $250 billion a year. Against more than $2 trillion already invested in AI infrastructure, he estimates those revenues may eventually need to reach $8 trillion to $10 trillion annually to justify the buildout, roughly 32 to 40 times today’s level.
Damodaran argues AI only gets close to that scale if it moves beyond helping workers and starts replacing them. If AI remains primarily a productivity tool, he estimates the potential market at closer to $2 trillion.
Companies worldwide pay roughly $26 trillion a year in wages and other employee compensation, according to Damodaran. Replacing part of that labor could open a much larger market for AI agents, but it also creates a problem: displaced workers lose the income they use to buy goods and services.
“What are all these companies that have replaced their employees with agents? Who are they going to sell this stuff to?” Damodaran said.
Traders See Nvidia Staying on Top
“Nvidia’s already made its money,” Damodaran said. He called the chipmaker a beneficiary of the spending boom and compared the cycle to musical chairs: “Nvidia doesn’t want the music to stop.”
The current numbers show why investors remain willing to pay up. Nvidia’s latest quarterly results showed revenue of $96.2 billion, up 106% year over year, while Data Center revenue jumped 117% to $89 billion.
Near-term prediction markets aren’t pricing a major reversal.
Polymarket gives Nvidia a 71% chance of finishing 2026 as the world’s largest company, versus 20% for Apple Inc. (NASDAQ:AAPL), with more than $7.3 million traded.
Nvidia’s roughly $5.17 trillion market value leads Apple’s $4.85 trillion by about $320 billion, so a relative move of around 6% would flip the ranking.
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