S&P 500 Surges to New Highs: Nvidia’s Growth Stands Out

The S&P 500 index has seen remarkable gains of nearly 27% this year and has recently crossed the 6,000 mark for the first time. Investors can feel optimistic as analysts predict further increases in 2025.

Analysts from RBC Capital Markets and Barclays expect the S&P 500 to reach 6,600 by the end of 2025, marking a rise of over 9% from current levels. More bullish estimates come from Yardeni Research and Deutsche Bank, who foresee the index hitting 7,000 by next year, while BMO Capital Markets sets a target of 6,700.

Nvidia: A Component Poised for Continued Success

One key player in the S&P 500 that has shown striking performance this year is Nvidia (NASDAQ: NVDA), boasting a remarkable 180% increase in share price. Recently, Nvidia faced some pressure following its fiscal 2025 third-quarter results, but it is expected to regain its growth momentum soon.

In the first nine months of the fiscal year, Nvidia reached $91.1 billion in revenue—an incredible 135% increase compared to the same timeframe last year. The company’s non-GAAP net income rose substantially to $2.10 per share, up from $0.78 per share in the same quarter last year. With a fiscal fourth-quarter revenue guidance of $37.5 billion, Nvidia could end the year with nearly $129 billion in sales. Analysts project earnings per share (EPS) to reach $2.95 for fiscal 2025.

A glance at the following chart indicates that Nvidia’s growth is expected to continue into next year.

NVDA EPS Estimates for Current Fiscal Year data by YCharts.

Nvidia’s revenue and earnings may outpace Wall Street predictions, especially due to the strong demand for its new Blackwell artificial intelligence (AI) graphics processing units (GPUs). These chips are crucial for major cloud companies engaged in AI training and inference.

Morgan Stanley recently highlighted that Nvidia has sold out its Blackwell chip capacity for the next 12 months. Therefore, Nvidia’s growth will largely depend on its manufacturing capabilities, as demand continues to soar. The company is actively working to expand the production of its Blackwell processors.

Reports from Taiwan’s DigiTimes suggest that Nvidia has secured 60% of the advanced chip packaging capacity at its foundry partner, Taiwan Semiconductor Manufacturing (NYSE: TSM). TSMC aims to double its advanced packaging capacity next year in response to the rising AI chip demand.

Some reports indicate that TSMC’s production capacity might increase even more dramatically, from 36,000 units per month currently to 90,000 units next year, with a projection of 130,000 units by 2026.

Impressive Earnings Potential Ahead

Nvidia is projected to achieve earnings of $4.41 per share in the next fiscal year, and this number is likely to rise. Just three months ago, it was estimated at $3.83 for fiscal 2026, increasing to $4.03 in recent estimates.

Due to robust demand for its chips and improvements in the supply chain, it is possible that Nvidia’s earnings estimates will continue to climb. Investors might respond favorably to these estimates, presenting a compelling reason to consider buying Nvidia shares now. Currently, it trades at 32 times forward earnings, which is below its five-year average of 41 times.

If Nvidia achieves earnings of $4.50 per share and trades at 40 times earnings, the stock price could rise to $180, representing a 30% increase from its current position—an enticing opportunity even after this year’s remarkable growth.

Are You Ready for This Investment Opportunity?

Have you ever felt like you missed out on lucrative stock investments? Now might be your chance.

Our analysts occasionally present a special recommendation termed “Double Down” for stocks they believe are on the verge of significant growth. If you’ve hesitated before, now may be the moment to buy. Consider this compelling data:

• Nvidia: If you had invested $1,000 when we first recommended it in 2009, you’d have $363,671!
• Apple: Investing $1,000 back in 2008 would have grown to $45,954!
• Netflix: A $1,000 investment in 2004 would have reached $486,533!

Currently, we’re issuing “Double Down” alerts for three outstanding companies. Opportunities like this may be rare.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 2, 2024

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool also recommends Barclays Plc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.