The past two years have been really great for Nvidia investors (NVDA -2.09%) The semiconductor giant’s stock has more than doubled in both 2023 and 2024, and is up 860% since the beginning of last year, thanks to the impact artificial intelligence (AI) has had on the company’s revenue and earnings.
In December 2023, I explained why Nvidia’s stock price could double in 2024. This includes strong demand for graphics processing units (GPUs) for AI model training and inference, and steps being taken by its manufacturing partner Taiwan Semiconductor Manufacturing. (NYSE:TSM)to increase supply.
In this article, we look at Nvidia’s 2025 catalyst and see why this fast-growing chipmaker could double in value again in the new year.
Steady demand and improved supply provide tailwinds
The company’s latest generation of GPUs built on the Blackwell architecture will be the biggest growth driver in 2025. Management said on the November earnings call that these chips are in full production and are being shipped to customers.
Blackwell-related revenues are expected to exceed expectations this quarter due to supply chain enhancements. The company also said demand significantly exceeds supply. This bodes well for Nvidia heading into the new year, as TSMC has announced that it will significantly increase its production capacity for advanced AI chips in 2025.
Market research firm IDC says TSMC is doubling its chip-on-wafer-on-substrate (CoWoS) advanced packaging capacity to 660,000 chips to meet demand from NVIDIA and other AI chip makers. We predict that we will expand to wafers. Nvidia reportedly acquired 60% of TSMC’s CoWoS capacity in 2025, so it should be able to significantly increase production of Blackwell processors.
In October 2024, Morgan Stanley analysts said that Blackwell GPUs will be sold out over the next 12 months (as reported by website Tom’s Hardware). Based on TSMC’s outlook, latency is likely to decrease, allowing Nvidia to fulfill more orders and significantly increase data center revenue. According to Morgan Stanley, the company is expected to ship 60,000 to 70,000 Blackwell B200 server systems in 2025. Each system is expected to cost between $2 million and $3 million. This suggests the company’s Blackwell system could generate revenue between $120 billion and $210 billion next year, and $165 billion at the midpoint.
Analysts expect NVIDIA’s fiscal year 2026 revenue (equivalent to 11 months in calendar 2025) to reach $195 billion, a 51% increase from the current year’s projected revenue of $129 billion. I will. However, the potential revenue from the Blackwell sale and the fact that Nvidia will continue selling its previous generation Hopper chips suggest it could easily exceed Wall Street’s growth expectations, with the stock price There is a possibility that the soil will double.
Why this fast-rising AI stock could double in 2025
Analysts expect Nvidia’s earnings to rise 50% to an average of $4.43 per share next year, outpacing the 12% growth rate the S&P 500 is expected to achieve. Investors should note that this average estimate for NVIDIA has increased significantly over the past three months, from $3.99 per share 90 days ago and $4.03 per share 60 days ago. There is. The highest profit estimate for next year by various analysts covering Nvidia is $6.11.
Nvidia’s strong revenue growth potential and impressive pricing power in the AI chip market could deliver strong growth in 2025, exceeding analysts’ expectations. Assuming Nvidia achieves $5 per share in earnings next year and trades at 55 times earnings at that point, the stock could eventually reach $275 (in line with the stock’s growth rate). . This is almost double the current level.
The reason I expect Nvidia to maintain its high valuation a year from now is because the company has the potential to significantly outpace the S&P 500’s earnings growth, so the market could reward it with a premium multiple. It is. Therefore, investors would be wise to continue holding Nvidia in their portfolios. This AI stock’s impressive growth could continue into the new year.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has a position in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
