According to Wall Street experts, 1 artificial intelligence (AI) stock with the stock split to buy before it rises 285%

Last week, Nvidia (NVDA -1.66%) reported solid financial results for the second quarter, but the stock is now down 20% from its peak. The pullback was fueled by concerns about the sustainability of the artificial intelligence (AI) boom and the delayed launch of Blackwell, Nvidia’s next generation of data center chips.

This represents a dramatic shift in market sentiment for the semiconductor company. Just three months ago, Nvidia announced a 10-for-1 stock split alongside phenomenal first-quarter financial results, and the news sent shares up 20% in the following week.

But Nvidia is still on track to become a $10 trillion company by 2030, according to Beth Kendig, principal technology analyst at the I/O Fund. She remains bullish on Blackwell and expects an upward revision to the consensus revenue estimate for the next fiscal year. “Early next year there will be fireworks again for Nvidia and we will be on track for the $10 trillion,” she told Yahoo Finance.

Former hedge fund manager and current Mad Money host Jim Cramer came to the same conclusion a few years earlier. In 2021, he told the CNBC Halftime Report that Nvidia could eventually be a $10 trillion company, and his conviction did not escape. “It’s my opinion that you should own Nvidia stock and not trade it,” Cramer recently told viewers.

Nvidia is currently worth $2.6 trillion, so Kendig and Cramer’s $10 trillion target implies a 285% upside for shareholders. Here’s what investors should know.

Nvidia has a sustainable competitive advantage in AI chips

Nvidia is best known for its graphics processing units (GPUs), chips that complete complex calculations orders of magnitude faster than central processing units (CPUs). The company accounted for 98 percent of data center GPU shipments last year, and its GPUs accounted for more than 80 percent of AI processors, according to analysts. Nvidia is also the market leader in AI networking equipment, fittingly Morningstar.

However, Nvidia is truly formidable because it combines cutting-edge hardware with proprietary CUDA software. The CUDA platform includes more than 400 software libraries (building blocks) that simplify the development of GPU applications in a wide range of disciplines. Nvidia launched CUDA in 2006, and the ecosystem is still expanding. For example, the company added new libraries for data processing, generative AI, and physics simulations in August.

Morgan Stanley analysts wrote in a recent note: “We’ve seen many threats to Nvidia since 2018 — something like a dozen start-ups, more efforts from merchant competitors such as Intel and AMDand more custom designs. Most of these fell short. Competing with Nvidia, a company that spends more than $10 billion a year on research and development, is a difficult feat.”

Blackwell GPUs might be the most important product in Nvidia’s history

Last week, Nvidia reported excellent financial results for the second quarter of fiscal year 2025 (ending July 2024). Revenue rose 122% to $30 billion as demand for AI hardware and software drove strong sales growth in the data center segment. Meanwhile, non-GAAP (generally accepted accounting principles) net income rose 152% to $0.68 per diluted share.

The chart below provides segment-specific revenue figures for the second quarter.

Shown above is second-quarter revenue growth in Nvidia’s four main business segments. OEM and other revenues were excluded as they accounted for less than 1% of total revenues.

In August, The Information published a report claiming that Blackwell GPU shipments would be delayed due to design flaws discovered unusually late in production. Nvidia CFO Colette Kress provided background on the recent earnings call: “We executed a mass change on the Blackwell GPU to improve production yield. The Blackwell production ramp is scheduled to begin in the fourth quarter.”

That means Blackwell will hit the market about three months later than management originally quoted. But CEO Jensen Huang still believes the platform will be a game changer for the industry. In fact, he recently told analysts, “The Blackwell architecture platform will probably be the most successful product in our history.”

Nvidia stock is trading at a reasonable valuation

Wall Street analysts expect Nvidia’s adjusted earnings to grow 49% annually through fiscal 2026 (ending January 2026). That consensus estimate makes its current valuation of 48 times adjusted earnings look reasonable.

Regarding the $10 trillion target set by Beth Kendig and Jim Cramer, I think Nvidia could reach the goal by 2030. For example, if we assume that the price-to-earnings ratio falls to 25 by the end of the decade, Nvidia would hit a $10 trillion valuation if earnings grew 36% annually.

That is within the realm of possibility. In fact, spending on AI hardware, software and services is expected to grow 36% annually through 2030, according to Grand View Research. However, investors should not take this result for granted. A lot could go wrong in the next six and a half years.