Nvidia Stock Will Soar in 2025. Here’s Why.

By Investor Empires On Nov 29, 2024

The past few years have been a non-stop thrill ride Nvidia (Nasdaq: NVDA) Investors. The company had a market cap of just $359 billion to start 2023. Now, its value has risen to more than $3.35 trillion (as of this writing) — a more than nine-fold increase in less than two years.

Driving this parabolic movement are the company’s graphics processing units (GPUs), which are quickly becoming the gold standard for gaming. Artificial Intelligence (AI). This has resulted in revenues that have jumped by 480% and net income by 1,270% since the beginning of 2023.

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Investors shouldn’t expect continued growth of this magnitude, but there’s plenty of evidence that Nvidia still has plenty of energy in the tank. Many of the world’s largest technology companies Continue to invest heavily To upgrade their infrastructure to handle the rigors of AI — and for most, that means stocking up on the latest Nvidia processors.

Aside from the obvious secular headwinds, there are important details that investors may be overlooking that could signal a big move for Nvidia in 2025. Read on to find out why.

Image source: Getty Images.

For Nvidia’s fiscal 2025 third quarter (ending October 27), revenue of $35.1 billion rose 94% year over year, while adjusted earnings per share (EPS) of $0.81 rose 103%. The results were well above management’s expectations, which called for revenue growth of 79%.

Management was clear about what led to this impressive showing. “The era of artificial intelligence is in full force, driving the global shift to Nvidia computing,” said CEO Jensen Huang.

Digging into the results, this top move was driven by continued strong demand within Nvidia’s data center segment, which grew 112% year over year to $30.8 billion. Much of this revenue was derived from the company’s Hopper architecture, the basis for its H200 Tensor Core GPU, and the GH200 Grace Hopper Superchip – which currently powers many of the world’s data centers and AI infrastructure.

Although these processors are currently the standard, they are about to be replaced by Nvidia’s Blackwell architecture, which represents the next generation of its AI-centric chips.

The company is working to increase production of Blackwell processors, and previously said it expects to ship “several billion dollars” of these chips in the fourth quarter of fiscal 2025, which ends in late January.

Nvidia has made no bones about the strong demand, as major tech companies compete to be among the first to get their hands on these next-generation AI-centric chips. In an interview with CNBC, Huang said demand for Blackwell was “insane.” He went on to say: “Everyone wants to have the most, and everyone wants to be first.”

With everyone wanting these chips, supply is currently outpacing demand, and this situation is not expected to be resolved for several quarters. During the earnings call, CFO Colette Kress said, “The demand for Blackwell is incredible, and we are racing to expand supply to meet the incredible demand.” She added in her written comment (emphasis mine), “Both the Hopper and Blackwell systems have certain supply limitations, and Demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026For context, Nvidia’s 2026 fiscal year begins in late January.

The resulting pent-up demand could serve as a springboard for Nvidia’s sales next year.

I’m not the only one who thinks so. Beth Kindig, CEO and lead technical analyst for I/O Fund, believes that in 2025, sales of Blackwell processors will exceed Nvidia’s 2023 and 2024 GPU sales. total. Kendig says the company’s runaway pricing power could lead to at least 50% growth in its data center segment next year. This could lead to upside of up to 70% for the stock in 2025.

This race is ongoing to increase the availability of its flagship processor, as Nvidia works with its suppliers to increase production. As the supply of next-generation processors increases, the company’s revenue will also increase, since increased production means more chips available for sale. This, in turn, will increase its already strong earnings, sending its stock price higher.

To be clear, we don’t know exactly when supply constraints ease, but Nvidia has a vested interest in working through the bottleneck as quickly as possible. Management has historically been conservative in its estimates, so we can probably We expect a gradual increase in supply of these advanced chips, which will be a catalyst for increased Blackwell sales as the year progresses.

Some investors have resigned themselves to the fact that Nvidia’s growth has already peaked. I believe this view is premature and represents an opportunity for smart investors with a long-term view. Its premium valuation has already begun to decline. Wall Street expects the company to generate earnings of $4.41 in fiscal 2026, which equates to just 31 times next year’s sales (as of this writing).

At some point in 2025, evidence suggests that the supply of Nvidia’s top-of-the-line Blackwell AI chips will accelerate, leading to a corresponding increase in sales. I expect this to be the catalyst that will ignite the stock price, sending it higher in 2025.

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