Nvidia gained $2 trillion in worth throughout 2024 and is now one of many largest firms in the world by market cap.
This previous yr was one other terrific one for know-how shares in explicit. Tailwinds pushed by synthetic intelligence (AI) helped push the S&P 500 increased by 23%, whereas the Nasdaq Composite gained a powerful 29%.
The “Magnificent Seven” shares had been among the many yr’s high gainers in the market, and maybe no different garnered extra consideration than semiconductor chief Nvidia — which was the top-performing inventory in the Dow Jones Industrial Common in 2024.
Last yr, Nvidia gained roughly $2.1 trillion in market capitalization — the very best of any firm. This propelled Nvidia to grow to be one of many world’s most valuable businesses. Whereas Nvidia’s present run might counsel that the inventory is due for a pullback, Wedbush Securities know-how analyst Dan Ives is looking for considerably extra development forward for the AI darling — and I agree.
Let’s take a look at Nvidia’s newest catalysts and make the case for why 2025 might be one other one for the report books.
The celebrities are aligning for Nvidia in 2025
During the last two years, Nvidia has emerged because the chief of the pack in the AI marathon, and all of it boils down to at least one factor: graphics processing models (GPUs). GPUs are superior chipsets needed for growing generative AI purposes.
Nvidia’s deep roster of GPUs has helped the corporate separate from rivals equivalent to Superior Micro Gadgets, and purchase an estimated 90% of the GPU market.
NVDA Revenue (Quarterly) information by YCharts.
So as to add some context right here, Nvidia’s dominance has fueled constant income and revenue development for the corporate — permitting it to double down on analysis and improvement (R&D) and pioneer even newer, progressive merchandise. Enter Blackwell, Nvidia’s next-generation GPU structure, which is reportedly already sold out for the next 12 months.
Whereas that is extra of a company-specific tailwind, Ives believes that broader investments in AI infrastructure could eclipse $1 trillion in the coming years. Nvidia is benefiting from this windfall of rising capital expenditure (capex), underscored by investments in European GPU cluster specialist Nebius, and the acquisition of AI infrastructure enterprise Run:ai (which it acquired for a reported $700 million).
Picture supply: Getty Pictures.
Is Nvidia inventory a purchase proper now?
Given the large rise in Nvidia’s inventory value, it is a prudent thought to have a look at among the firm’s valuation metrics and cross-reference them towards the catalysts I’ve coated above.
Information supply: YCharts.
On the floor, the valuation multiples above could give the phantasm that Nvidia is a dear inventory. However when you think about that the corporate’s P/E and P/FCF are materially decrease in the present day than they had been a yr in the past, Nvidia’s valuation profile seems to be fairly compelling. Primarily, the corporate’s income are accelerating at a sooner price than the corporate’s worth (value, or market cap), and subsequently Nvidia’s valuation truly might be seen as fairly cheap.
Moreover, a PEG ratio of 1 implies that Nvidia is pretty valued proper now. I believe it is fairly troublesome to forecast what Nvidia’s earnings profile might seem like over the subsequent a number of years as Blackwell and the corporate’s peripheral investments start to bear fruit.
Not solely do I see Nvidia as a screaming purchase proper now, I believe the corporate might be the primary to enter unique territory in 2025: The $4 trillion club. I’m excited for a way Nvidia will carry out this yr, and I believe the inventory is a compelling shopping for alternative proper now for AI and development buyers alike.
Adam Spatacco has positions in Nvidia. The Motley Idiot has positions in and recommends Superior Micro Gadgets, Nebius Group, and Nvidia. The Motley Idiot has a disclosure policy.