As the artificial intelligence (AI) revolution enters its third year, certain Wall Street analysts expect Nvidia(NASDAQ: NVDA) and Microsoft(NASDAQ: MSFT) to make history by becoming the first $4 trillion companies.
Ivan Feinseth at Tigress Financial recently raised his Nvidia target price to $220 per share. That implies 83% upside from its current share price of $120. It also implies a market value of $5.3 trillion.
Joel Fishbein at Truist Financial recently reiterated his Microsoft target price of $600 per share. That implies 44% upside from its current share price of $416. It also implies a market value of $4.4 trillion.
Importantly, both analysts set their target prices following reports that Chinese AI start-up DeepSeek trained an advanced AI model while spending significantly less than U.S. companies. That suggests neither analyst is particularly worried that U.S. companies will pull back on AI infrastructure investments.
Additionally, Dan Ives at Wedbush Securities also expects Nvidia and Microsoft to attain $4 trillion market values in 2025 as the AI boom continues to build steam. He recently speculated that DeepSeek building a sophisticated model for "$6 million with no Nvidia next-generation hardware is likely a fictional story."
Here's what investors should know about Nvidia and Microsoft.
Nvidia: 83% implied upside
Nvidia is the market leader in data center graphics processing units (GPUs). Those chips are the industry standard in accelerating computationally intense workloads like artificial intelligence (AI). That means the company has a massive tailwind at its back. Data center GPU sales are projected to increase at 29% annually through 2030, according to Grand View Research.
Nvidia reported strong financial results in the third quarter of fiscal 2025, which ended in October 2024. Sales increased 94% to $35 billion on particularly strong momentum in the data center segment, which itself reflects persistent demand for AI hardware. And non-GAAP earnings jumped 103% to $0.81 per diluted share. That marks the sixth straight quarter in which the company reported triple-digit earnings growth.
CEO Jensen Huang during his keynote speech at 2025 CES highlighted big opportunities in physical AI, a term that refers to machine learning models that can understand, navigate, and interact with the physical world. Nvidia offers a full-stack computing solution spanning supercomputing infrastructure, software development tools, and embedded processors for self-driving cars and autonomous robots.
Looking ahead, Wall Street expects Nvidia's adjusted earnings to increase 50% in the next four quarters. That makes the current valuation of 45 times adjusted earnings look very reasonable. Those numbers give a price-to-earnings-to-growth (PEG) ratio of less than 1. Traditionally, PEG multiples below 1 are considered cheap.
Additionally, Dan Ives at Wedbush Securities thinks self-driving cars and autonomous robots represent a $1 trillion opportunity for Nvidia, in addition to the $1 trillion opportunity the company has outlined in accelerated computing and generative AI. Consequently, Ives thinks the Wall Street consensus underestimates earnings by as much as 30% in the next few years.
If Nvidia continues to meet or exceed earnings estimates in the coming quarters, I think the company could achieve a market value above $4 trillion (or even $5 trillion) before the end of 2025.
Microsoft: 44% implied upside
Microsoft has two important growth engines in enterprise software and cloud computing. Specifically, it is the largest software company and the second largest public cloud in the world, and it's using AI in both business segments to create new revenue streams. For instance, Microsoft 365 Copilot automates tasks across its office software, and Azure AI is a cloud platform for building AI applications.
Microsoft reported reasonably good financial results in the second quarter of fiscal 2025, which ended in December 2024, beating estimates on the top and bottom lines. Revenue increased 12% to $69.6 billion on strong sales growth in enterprise software and cloud services. And GAAP net income increased 10% to $3.23 per diluted share.
CEO Satya Nadella on the earnings call said AI products achieved an annual revenue run rate of $13 billion, up 175% from last year. No product category has hit that milestone more quickly in company history. Microsoft also reported 31% sales growth in cloud services, and 13 percentage points of that growth came from AI products, according to CFO Amy Hood.
However, management provided third-quarter guidance that fell short of what Wall Street anticipated, causing shares to tumble 5% after hours. And the stock still looks expensive. Wall Street expects earnings to increase 10% in the next four quarters, but shares trade at 33 times earnings. Those numbers give it a PEG ratio above 3, which is generally considered overvalued.
Having said that, Microsoft has reported above-consensus earnings in every quarter in the past two years, and that may continue as customers increase AI spending. Indeed, Morgan Stanley sees Microsoft as the clearest winner in AI software. If that continues, the company may achieve a market value of $4 trillion by the year's end in 2025.
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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
