Did you catch Nvidia’s (NVDA) earnings on Wednesday?

This is the stock of a lifetime.

Sales doubled over the past year. Just look at Nvidia’s growth since the artificial intelligence (AI) boom kicked off.

This is the largest corporation in the world, worth $5 trillion, growing like a nimble startup!

Despite another blowout quarter proving just how strong AI demand is, many investors still call AI a bubble and Nvidia “the Cisco Systems (CSCO) of our era.”

They are totally and utterly wrong.

• Cisco surged 100,000% during the internet boom.

It was the stock to own.

Cisco made the routers and switches that allowed computers and networks to talk to each other. It supplied the plumbing that made the internet boom possible, like Nvidia does today with its GPUs.

Unfortunately for investors, Cisco crashed 90% once the dot-com bubble burst and spent the next 25 years working its way back to its peak.

Cisco and Nvidia share many similarities. But they don’t share the one that caused Cisco to crash:

Sky-high valuation.

Around the top of the dot-com boom, Cisco was trading at 130X earnings. Investors were willing to pay more than $100 for every $1 of profit Cisco was expected to earn.

At those prices, nearly everything had to go right. Cisco could keep growing quickly and still disappoint investors because so much future success was already baked into the stock.

When growth slowed and the dot-com boom cracked, its valuation plunged and dragged the stock down.

Now compare that with Nvidia. It trades at just 20X forward earnings: Its cheapest valuation since the AI revolution started in 2023, despite soaring 1,500% since ChatGPT launched.

How is this possible? Because its profits shot up even faster, surging 4,300%.

The other thing that killed Cisco was that its customers built roads nobody drove on.

During the dot-com boom, telecoms increased network capacity 186,000-fold. By 2002, just 2.7% of the fiber optic cables in the ground were lit. And they built it all with borrowed money—telecom CapEx ran at 200% of operating cash flow.

Now look at today. The GPUs are rented out the day they're racked. Cloud giants fund the build from roughly 50% of their operating cash flow... the most profitable companies in history, paying cash.

And here's the cherry on top: The rental price of GPUs is rising. Even chips several years old still earn more per year than they cost to buy. In 2002, used routers sold for pennies on the dollar.

Cisco's customers built supply and assumed demand would come. Nvidia's customers have demand and can't build supply fast enough.

Nvidia is chronically undervalued at today’s prices. Which is why I think…

• Nvidia will reach $10 trillion.

At today’s valuation, profits need to roughly double for Nvidia to get there. Given how fast its chips are selling, that’s easily achievable.

I understand the idea of a $10 trillion company might sound bubbly. But only because we have never seen one before.

In 2011, Apple (AAPL) became the world’s largest company. It was worth about $380 billion at the time.

Imagine telling someone back then that Apple could 10X and be worth $4.5 trillion. You would have been predicting that the biggest company in the world could grow more than 10-fold from an already enormous base.

Yet it happened. Apple crossed $1 trillion in 2018. Two years later, it crossed $2 trillion. And eventually, it sailed through $3 trillion and $4 trillion as well.

The ceiling kept rising as the global economy expanded. Smartphone adoption grew. And Apple kept raking in more profits.

Maybe Nvidia will one day be worth $100 trillion. Who knows. One company will get there eventually. Why not the one at the center of the biggest megatrend of our lifetimes?

• I first recommended Nvidia eight years ago.

At the time I said, “If I could only buy one stock for the next five years… Nvidia would be it.”

NVDA’s surged 3,000% since.

Given it’s at the epicenter of the biggest disruption megatrend of our lifetime, I think it’s still a good buy today.

Nvidia just did $96 billion in a single quarter and guided to $108 billion. That's a ~$430 billion yearly pace, before its next-generation Rubin systems, which CEO Jensen Huang says will be "supply-constrained for their entire life," even shipping in volume.

For Nvidia to hit $10 trillion by 2028, profits need to roughly double from here.

Nvidia's profits doubled in the last 12 months.

Stephen McBride

Chief Analyst, RiskHedge

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