Nasdaq’s Stellar Rise: Is Nvidia the Key Stock for Future Gains?

The Nasdaq has seen a remarkable climb over the last two years, gaining over 43% in 2023 and on track for a growth exceeding 33% in 2024. This surge is driven by the artificial intelligence (AI) boom, where five of the index’s largest stocks, along with several others in the top ten, are deeply engaged in this quickly expanding field. Currently valued at $200 billion, the AI market is projected to soar past $1 trillion by the end of the decade, offering substantial opportunities for early investors in this technology.

So, why all the enthusiasm for AI? Experts believe it holds the potential to transform various sectors, leading to significant time and cost savings for companies. This promise could drive strong earnings growth, providing further optimism about the Nasdaq’s performance in the upcoming year.

Historical Patterns Support Nasdaq’s Future Success

Looking at past trends gives us additional reasons to expect the Nasdaq’s continued success. Since 1990, the index has experienced gains in five out of six periods, often achieving more than two consecutive years of growth. This historical data suggests that multiple years of consistent gains are not unusual.

While there are no guarantees in the stock market—indexes and stocks can behave unpredictably—preparation is wise. Identifying key stocks to purchase before the next Nasdaq rally can provide significant advantages. Let’s explore which stock might be pivotal.

Image source: Getty Images.

Nvidia: A Powerhouse Across Major Indexes

One crucial player in this landscape is Nvidia, a member of the Nasdaq, the S&P 500, and more recently, the Dow Jones Industrial Average. Over the past five years, Nvidia has skyrocketed more than 2,400%. Its stronghold in the AI sector, combined with current developments, hints it still has significant growth potential. Therefore, Nvidia could be an excellent investment today, especially as it may further elevate the Nasdaq in the coming year.

Nvidia (NASDAQ: NVDA) specializes in creating the world’s most powerful graphics processing units (GPUs), essential for various key AI functions, including model training and inference. Customers have recognized Nvidia’s leading position, often opting to wait for its highly sought-after products and paying premium prices compared to competing AI chips. Notably, Oracle co-founder Larry Ellison and Tesla CEO Elon Musk have publicly expressed their desire for more Nvidia GPUs, highlighting the demand for its technology.

Driving Forces Behind Nvidia’s Growth

Currently, Nvidia is ramping up production of its innovative Blackwell architecture, expected to bolster its earnings significantly. This new offering comes with multiple customizable features, making it Nvidia’s most advanced AI platform to date. The company noted that demand for Blackwell is “staggering,” indicating a robust sales outlook.

During the initial quarter of Blackwell’s commercialization, Nvidia anticipates generating several billion dollars in revenue from this platform, building upon its already remarkable revenue, which grew 94% to $35 billion in the latest quarter. As Blackwell’s launch progresses, it is likely to attract even more investors to Nvidia.

What about Nvidia’s valuation? Its stock currently stands at 47 times its projected earnings. While not the most affordable option, considering Nvidia’s industry leadership, commitment to continuous innovation, and a gross margin exceeding 70% in recent quarters, many believe this valuation remains reasonable.

Looking ahead, Nvidia’s prospects could drive significant growth across the Nasdaq well into 2025. Even if the stock experiences short-term fluctuations, the long-term earnings outlook remains promising, potentially leading to substantial returns for investors.

A Golden Opportunity Awaits Investors

When it comes to successful investing, it’s natural to feel as though you’ve missed valuable opportunities. Now may be a pivotal moment for you.

Experts occasionally issue a “Double Down” stock recommendation, targeting companies poised for impressive growth. If you fear having missed your chance to invest, now is an ideal time to consider entering the market before further upward momentum shifts.

• Nvidia: If you invested $1,000 when we first recommended it in 2009, you’d currently have $348,112!*
• Apple: A $1,000 investment when we recommended it in 2008 would be worth $46,992!*
• Netflix: Similarly, investing $1,000 when we doubled down in 2004 would yield $495,539!*

We are presently issuing “Double Down” alerts for three outstanding companies, making this a potentially unique opportunity.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 9, 2024

Adria Cimino holds positions in Oracle and Tesla. The Motley Fool holds positions in and recommends Nvidia, Oracle, and Tesla. The Motley Fool has a disclosure policy.

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