Nvidia (NASDAQ:NVDA) is a leading supplier of data center graphics processing units (GPUs) used to develop artificial intelligence (AI) models. Demand for these chips far exceeds supply, which is driving up the company’s financial results incredibly.
Nvidia CEO Jensen Huang believes data center operators will invest $1 trillion over the next four years in infrastructure upgrades to meet the demands of AI developers. Based on projections from other sources, this estimate may be conservative.
I believe there is a clear mathematical path for NVIDIA stock to rise another 82% and comfortably exceed $200 in 2025. Here’s why:
Nvidia’s H100 GPUs were extremely popular in 2023, giving the company a whopping 98% share of the AI data center chip market. It’s still a top seller, but data center operators are lining up to buy Nvidia’s latest chips built on the new Blackwell architecture. This will significantly improve performance. This means AI training and AI inference workloads can process large amounts of data faster.
Blackwell-based GB200 NVL72 systems can run AI inference 30 times faster than comparable H100 systems. A single GB200 GPU in an NVL72 system sells for about $83,000, which is about twice the price of the H100, but the 30x improvement in inference performance represents significant cost savings for companies deploying AI. Connect.
So far, the biggest buyer of Blackwell GPUs is reportedly Microsoft. We use them to develop AI for our own purposes, but we also rent computing power to other AI developers for a fee through the Azure cloud platform. Amazon Web Services, Alphabet’s Google Cloud, and Oracle could also be big customers for Blackwell for the same reason.
Nvidia shipped 13,000 Blackwell samples to customers during its recent fiscal third quarter of 2025 (ending Oct. 27), but that number will likely increase quickly as demand is “staggering.” Jensen Huang said. Morgan Stanley expects NVIDIA to ship up to 300,000 units in the last three months of 2024, followed by 800,000 units in the first three months of 2025.
According to Nvidia, Oracle alone uses over 131,000 Blackwell GPUs to build clusters, and Oracle has much lower AI capital expenditures than cloud providers like Microsoft and Amazon. , Morgan Stanley’s estimate is probably not far off.
the story continues
Nvidia’s fiscal year is different from a typical calendar year. As mentioned above, the company is currently in its 2025 fiscal year, which ends on January 30, 2025, less than two months from now. As a result, Nvidia’s fiscal year 2026 will cover most of its 2025 calendar year.
Nvidia’s revenue is expected to reach a record $128.7 billion in fiscal 2025 (according to the company’s guidance). This is a staggering 111% increase from 2024. At least 80% of its revenue will come from its data center division. This includes sales of AI GPUs such as H100 and GB200.
Nvidia revenue graph.
According to Wall Street consensus forecasts for fiscal year 2026 (provided by Yahoo), Nvidia’s total revenue is expected to reach another record high of $195.4 billion. This represents a growth of 51%, which is less than half of the growth rate in FY24 and FY2025.
Nvidia’s revenue has grown so much that it’s impossible for the company to maintain triple-digit growth rates. This isn’t necessarily a bad thing, especially since spending on AI infrastructure is expected to increase significantly in the future.
As mentioned earlier, Huang predicts $1 trillion in spending on AI infrastructure over the next four years. Morgan Stanley believes just four companies – Microsoft, Amazon, Alphabet and Meta Platforms – will spend a combined $300 billion in 2025 alone. This doesn’t include other big investors like Oracle, OpenAI, or even Tesla.
Therefore, Huang’s estimates may be too conservative.
Nvidia’s dominant market share in the data center GPU space gives it considerable pricing power. In other words, demand is so strong that it can command very high prices, which is pushing up the company’s profit margins.
That’s why Nvidia’s earnings per share (EPS) soared 103% in its recent third quarter. Based on the company’s trailing 12-month EPS of $2.62, the price-to-earnings ratio (P/E) is 56.1 at the time of writing.
The Nasdaq 100 Technology Index has a P/E ratio of just 33.9, which sounds expensive at face value. However, NVIDIA’s average P/E ratio over the past 10 years is 58.6x, so the current stock price is actually undervalued.
NVDA PE ratio data by YCharts.
Looking forward, Nvidia’s EPS for fiscal 2026 could be $4.43, according to Wall Street consensus estimates. This gives the stock a forward P/E of just 32.1x. This means the stock would need to jump 82% next year to trade in line with its 10-year average P/E of 58.6. This means the stock price will be $259.
I can’t believe I’m saying this since Blackwell’s shipments just increased, but one Wall Street analyst says Nvidia’s next GPU architecture (called Rubin) will be 6 months ahead of schedule. I think it’s possible. If Nvidia reveals more information in the next 12 months, this could also be a catalyst for the stock’s upside.
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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. Alphabet executive Suzanne Frye 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. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. 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.
“Prediction: Nvidia stock soars above $200 in 2025” was originally published by The Motley Fool
