Few stocks have performed as consistently as Nvidia. (NASDAQ:NVDA) In the last two years. So far in 2023, it’s up nearly 900% after posting incredible gains in both 2023 and 2024. The question now is, can NVIDIA take third place and become a top performer in 2025?
2025 is likely to be the most difficult year of the three years, as Nvidia’s growth is starting to slow (though it’s still strong). But is Nvidia still the top artificial intelligence (AI) stock to own in 2025?
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Nvidia has risen to the top of AI investing because it is the foundation for building and training AI models. The graphics processing unit (GPU) and the software that controls it, CUDA, are best in class. When speed is the name of the game, there’s no room for a second-place company that can’t match Nvidia’s performance.
GPUs are the perfect tool for this task because they can process multiple calculations in parallel. This benefit can be further multiplied by connecting thousands of GPUs in a compute cluster. Nvidia’s business is booming and its stock price is rising, as many of the biggest AI and cloud computing companies are buying thousands of GPUs each month.
On the positive side for Nvidia stock, this trend looks set to continue into 2025.
Meta Platforms told investors it expects “significant acceleration in infrastructure spending growth” in 2025. This clearly means that Nvidia will benefit from further spending next year. Mr. Mehta is not alone in this. Other top spending companies, such as Microsoft and Amazon, also commented that high spending will continue next year.
This is a great sign for Nvidia, as it shows that the industry has not yet reached peak GPU demand.
But is the growth in 2025 already factored into the stock price?
When a company experiences a major wave of growth, it is not uncommon for the market to start pricing in future growth and the company’s stock price to soar. This valuation will gradually decrease as business benefits are realized. However, this is not the case with NVIDIA’s stock price.
NVDA PE Ratio (Forward 1y) Data by YCharts
This chart shows NVIDIA’s one-year expected price-to-earnings ratio and uses next year’s expected earnings to calculate the company’s price. At 33 times fiscal 2026 earnings, Nvidia’s stock price is the most expensive it’s ever been. However, you have to consider whether Nvidia would be justly valued for its price.
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Considering companies like Apple and Microsoft trade at 29 times next fiscal year’s earnings, the small premium you have to pay for Nvidia’s top-notch growth seems worth it. .
For fiscal year 2026 (Nvidia’s fiscal year that includes most of 2025), Wall Street analysts are predicting revenue growth of more than 50%. This will likely leverage Nvidia’s next-generation Blackwell infrastructure. This provides significant performance improvements over the current architecture, Hopper. Improved performance may prompt many companies to upgrade their computing servers to outperform their competitors, but this trend may not be complete until 2025.
As a result, NVIDIA still has plenty of tailwinds, making it a solid stock heading into 2025. However, investors need to understand that stock prices likely won’t rise as much as they did in 2023 or 2024. In fact, that’s what I expect. Although double-digit growth is modest, it is likely to be high enough to outperform the market. As a result, Nvidia is likely to be another top AI stock in 2025, although it doesn’t have the potential for returns as high as the past two years.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Keithen Drury has positions at Amazon and Meta Platforms. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Will Nvidia be the top artificial intelligence (AI) stock to own in 2025? Originally published by The Motley Fool
