Should you buy Nvidia stock by 2025?

There’s no denying that 2024 was a breakthrough year for Nvidia (NVDA -2.09%). The company has established itself as the gold standard for graphics processing units (GPUs) that power artificial intelligence (AI), and the future remains bright. The stock is up over 850% since the AI ​​revolution began in early 2023, and 182% this year alone.

But this doesn’t tell the whole story. Over the past six months, NVIDIA’s stock price has stalled, even as earnings continue to expand. Concerns about future AI adoption, competition fears and high valuations have some investors wondering if the company’s best days are behind it.

Let’s take a look at what the future holds for Nvidia and whether the stock is still an attractive opportunity for investors heading into the new year.

Image source: Getty Images.

rich in catalysts

There are many catalysts that could move Nvidia stock in the first half of 2025, so investors should mark their calendars.

CEO Jensen Huang is something of a rock star in the investment community. The popular CEO tends to generate excitement that can move Nvidia’s stock price every time he gives a speech. One such appearance will be the opening of the Consumer Electronics Show (CES), where Huang is scheduled to give a keynote speech on January 6th.

Mr. Huang has his finger on the pulse of the technology industry and is expected to weigh in on the pace of AI adoption and the current state of technology in general. Perhaps more importantly, he’s also likely to provide on-demand updates to Nvidia’s Blackwell platform. The next-generation processors, designed specifically for AI applications, were scheduled to begin shipping earlier this month. Hwang previously said demand for the chip was “insane,” so expectations are high and any positive update would likely push the stock higher.

In fact, Citi analyst Atif Malik put Nvidia on “positive catalyst watch” ahead of Huang’s arrival. The analyst maintains a Buy rating and $175 price target, suggesting a potential upside of 25% from Tuesday’s closing price. Malik believes the latest information on Blackwell’s sale and the potential for higher margins could drive the stock higher.

It’s worth taking a look at investors’ concerns about Nvidia’s margins. The company’s gross profit margin for the first quarter of fiscal 2025 (ending April 28) was 78.4%, a record high. However, in the following two quarters, its margins declined to 75.1% and 74.6%. Management attributed these declines to “inventory reserves” related to Blackwell’s upcoming launches, and forecast gross margins of 73% for the current quarter. In some cases, declining margins can be a red flag in the long term, but two quarters of declining margins is too small a sample size for investors to worry about, especially in the first quarter. On the heels of record performance, upcoming product launches.

The most important potential catalyst going forward is Nvidia’s fiscal 2025 fourth quarter financial report, scheduled to be released on February 26th. Management expects sales to be $37.5 billion, representing approximately 70% growth. It has a long history of issuing conservative guidance. For example, after announcing a forecast of 79% growth in the third quarter, Nvidia achieved growth of approximately 94%. If Blackwell’s shipments end stronger than expected, and history suggests that’s likely, the company could outperform Wall Street expectations, which could also send Nvidia stock higher. be.

Finally, investors’ fears that AI adoption will stall seem overblown. A study by PwC, a Big Four accounting firm, estimates that AI could add as much as $15.7 trillion to the global economy by 2030. In fact, this data shows that 45% of all economic gains during this period were the result of AI-driven product enhancements that further increased consumer demand.

Should investors buy NVIDIA by 2025?

There’s one final reason investors should consider buying Nvidia stock before 2025. That is its valuation. However, this requires some background.

At the height of the excitement around AI earlier this year, NVIDIA stock was selling for 83x P/E. However, over the past year, that multiple has steadily declined, and the stock currently sells for a P/E ratio of 55. Although it may still seem expensive at first glance, it is worth considering the historical context. Over the past 10 years, NVIDIA’s average price-to-earnings ratio (P/E) has been 59 times, indicating that the current price-to-earnings ratio is historically low.

Additionally, NVIDIA is expected to generate earnings per share (EPS) of $4.43 in fiscal year 2026, according to Wall Street. That’s just 32 times next year’s expected earnings, an attractive valuation for a company with such an impressive growth track record.

Taken together, Huang’s upcoming appearance at CES, the blockbuster potential of Nvidia’s next-generation Blackwell AI processors, the potential for improved margins, an attractive valuation, and the company’s pivotal importance in recent AI advances. role suggests that there is potential for improvement in the short term.

However, investors looking to make a quick buck should be careful. Any of the aforementioned catalysts could work in the opposite direction, lowering the stock price, at least temporarily.

Importantly, if you, like me, believe that AI has the potential to transform your industry and that Nvidia is one of the main beneficiaries of this trend, then buy Nvidia stock and Good luck with the ups and downs ahead. It doesn’t matter if you buy stocks before 2025, as long as you buy them.