Nvidia (NVDA -0.02%) is a leading supplier of networking hardware and chips for gaming, computing, robotics, and especially data centers where most of the artificial intelligence (AI) development takes place.
When Nvidia stock went public in 1999, the company’s market capitalization was about $500 million. Since then, the company has grown to a staggering $3.5 trillion in value, with more than $3 trillion of that value generated in the past two years alone thanks to soaring demand for its AI data center chips. Ta.
As of this writing, NVIDIA stock is trading at $144.47, but there are two reasons why I think it could rise to $200 (or more) sometime in 2025. If I’m correct, the company is valued at nearly $4.9 trillion, which translates to a 38% return for investors.
Image source: Nvidia.
First reason: Blackwell’s rapid sales growth
Graphics processing units (GPUs) are more effective at AI workloads than traditional central processing units (CPUs). They are specifically designed for parallel processing and can handle multiple tasks simultaneously without compromising performance. This is important because AI development requires extremely large amounts of data.
Nvidia’s flagship H100 GPU is built on the Hopper architecture, which helped the company capture 98% of the total AI datacenter chip market in 2023. It was replaced by the H200 GPU, which started shipping in mid-2024 and offered nearly all features. Twice the performance. But in 2024, Nvidia is announcing an entirely new architecture called Blackwell, which promises another leap in performance.
Blackwell-based GB200 NVL72 GPU systems can run AI inference a whopping 30x faster than comparable H100 systems. That performance is unleashed by Nvidia’s 5th generation NVLink networking technology, which allows GPUs to communicate with each other faster than ever before. The GB200 NVL72 system is 25 times more energy efficient than comparable H100 infrastructure, delivering significant savings to data center operators on their electricity bills.
Nvidia shipped 13,000 sample GB200 GPUs to customers during the third quarter of fiscal 2025 (ending October 31, 2024). Sales are likely to increase rapidly, as demand currently far exceeds supply.
Morgan Stanley (which rates NVIDIA stock as a top stock for 2025) expects NVIDIA to ship approximately 450,000 GB200 GPUs in the last three months of 2024, followed by ~800,000 in the first three months of 2025. We predict that it will be shipped. Other analysts expect Blackwell to do so. We’re scaling up a little more slowly, but we’re still very optimistic about this year’s potential.
Blackwell’s revenue could surpass Hopper’s by April, highlighting how quickly Nvidia’s business can transform.
Nvidia’s 2025 fiscal year ends at the end of this month. The company is on track to achieve a record $128.6 billion in total revenue, representing 112% growth compared to fiscal 2024. After the next few quarters, about 88% of the company’s total revenue for the year will come from its data center division. Driven by GPU sales.
This is a significant change from just three years ago in 2022, when the data center division accounted for just 39% of the overall business.
Second reason: Nvidia stock trades at an attractive valuation.
Nvidia currently operates at very high profit margins. This is because demand for GPUs far exceeds supply, which gives the company pricing power. That’s why earnings per share more than tripled (year-over-year) to $2.62 over the past four quarters.
Using this number, NVIDIA stock currently trades at a price-to-earnings ratio (P/E) of 56.8. This is actually a bargain compared to the 10-year average of 58.9x. In other words, NVIDIA stock may still be cheap despite soaring more than 800% in the past two years alone.
Looking to the future, the picture becomes even more appealing. According to Wall Street consensus forecasts (provided by Yahoo), NVIDIA could generate earnings of $4.43 per share during fiscal year 2026 (starting next month), giving the stock a forward P/E of just 32.6.
NVDA PE ratio data by YCharts.
This means that NVIDIA’s stock would need to jump 80% over the next 12 months to trade in line with its 10-year average P/E ratio ($260).
But in the middle of this year, Wall Street will start paying attention to Nvidia’s earnings forecast for fiscal 2027. If its impressive growth is likely to stall, investors may be hesitant to push the stock above $260.
It is too early to know what will happen at this stage, especially since competition will almost certainly increase next year.
For now, I think a realistic target for Nvidia stock during calendar 2025 is $200. Assuming Wall Street’s earnings forecasts are accurate, that means the year-end P/E ratio will be 45.5. This is a large enough discount compared to the company’s average P/E ratio over the past 10 years that investors would still find it an attractive value.
