the Nasdaq Composite The fire has been on fire over the past two years, driven by the rise of artificial intelligence (AI), improving economic conditions, uncontested elections, and recent moves by the Federal Reserve to lower interest rates. After returning 43% in 2023, the tech-focused index is up nearly 30% in 2024. History suggests the rally is likely to continue through 2025.
The current bull market began on October 12, 2022, and although every rally is different, history can provide important context. Bull markets last more than five years on average. Since the current rally is entering its third year, there is a strong possibility that the Nasdaq will continue to make gains in the coming year. It’s also worth noting that the Nasdaq has gained 73% of the time, dating back 53 years, so history is on investors’ side. Finally, the Nasdaq jumped 12%, on average, in the years following positive gains, indicating that there is additional upside ahead.
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Moreover, there has been a revival in popularity Stock splits Over the past few years. As a result, there is renewed investor interest in companies that undergo stock splits, as this is historically preceded by years of strong sales and earnings growth. One of these companies is Nvidia (Nasdaq: NVDA). The stock has gained 26.920% over the past decade (as of this writing), prompting management to start… 10-for-1 stock split Earlier this year – after a 4-to-1 split in 2021.
Despite the recent surge, there’s reason to believe Nvidia’s growth spurt will continue into 2025. Read on to find out why.
Adoption of generative AI has spread like wildfire over the past couple of years, with companies eager to share in the productivity increases promised by these advanced algorithms. Generative AI has proven adept at crafting and summarizing emails, searching and condensing content, mining data, creating original content, and writing computer code — and new applications are being discovered every day. Automating and simplifying tasks saves users time and money, driving new users to adopt AI.
Nvidia pioneered the graphics processing units (GPUs) that make all of this possible. These specialized chips provide the massive number-crunching power that brought artificial intelligence to life. The secret is parallel processing, or breaking down computer-intensive tasks into smaller, more manageable parts. Nvidia first developed these chips to deliver lifelike visuals in video games, but soon discovered other applications for this advanced technology, including data centers, high-performance computing (HPC), and machine learning — a former branch of artificial intelligence.
The vast majority of AI processing takes place in the cloud and in data centers, another factor that directly benefits Nvidia. The company controls up to 98% of the data center GPU market, according to semiconductor analysis firm TechInsights. As evidenced by its well-established position, Nvidia has become the gold standard for AI processing.
There’s always talk of ramping up the competition, but so far Nvidia remains king of the hill.
To understand the scale of Nvidia’s rise, it is useful to look at its financial results. After achieving triple-digit sales and profits last year, the company’s impressive winning streak continues. During the third quarter of fiscal 2025 (ending October 27), Nvidia generated record revenue of $35.1 billion, up 94% year over year. It also achieved earnings per share (EPS) of $0.78, an increase of 111%. For context, the company generated more sales in one quarter than it produced everyone For the fiscal year 2022.
The biggest contributor to its success was the company’s data center segment, which includes cloud computing, data center and AI chips, and grew 112% year-over-year to $30.8 billion.
Wall Street expects Nvidia’s growth streak to continue. For fiscal 2026 (which begins in late January), consensus estimates call for revenue of $195 billion, which represents a 51% increase year over year. However, the highest estimates point to more than $269 billion, which represents growth of more than 100%. Wall Street is notorious for underestimating Nvidia’s growth, so the reality is likely somewhere in between.
Nvidia will start shipping its next-generation Blackwell platform later this year, and by all accounts, the company has another market leader on its hands. Bank of America Analyst Vivek Arya stresses that investors are still underestimating demand for Blackwell, which he believes will outperform Nvidia’s Hopper chips within two to three quarters. There’s also a big disconnect between Nvidia’s addressable market and how investors view it:
They’re really integral to the system at this point. They sell entire racks of all the computing hardware, networking, optical resources, memory, everything they throw around. For this reason, the opportunity for revenue monetization is much greater (than investors estimate).
The analyst goes on to say that Nvidia is bundling its software with these myriad systems. Taken together, all of these opportunities help explain why Nvidia’s addressable market continues to expand.
However, despite all this opportunity – and despite its 183% gain so far this year – Nvidia’s price remains attractive. Wall Street believes Nvidia will generate earnings per share of $4.42 in fiscal 2026 (which begins in January). This means the stock is currently selling for roughly 32 times forward earnings (as of this writing), which is remarkably cheap given the opportunity.
If I could only buy one stock split before 2025, it would have to be Nvidia.
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Bank of America is an advertising partner of Motley Fool Money. Danny Vina He has positions at Nvidia. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool has Disclosure policy.
History says the Nasdaq will rise in 2025. 1 stock split stock to buy before that happens. Originally published by The Motley Fool