Nvidia’s Stock: Is It Still a Smart Investment as 2025 Approaches?
Impressive Growth Amid Stock Stagnation
2024 has been a remarkable year for Nvidia (NASDAQ: NVDA). The company has established itself as a leader in graphics processing units (GPUs) crucial for artificial intelligence (AI). Since the AI movement began in early 2023, Nvidia’s stock has skyrocketed more than 850%, gaining 182% in 2024 alone.
However, the past six months have been challenging. Despite Nvidia’s robust business performance, its stock price has flatlined. Concerns about AI adoption rates, increasing competition, and high valuations have led some investors to rethink their positions.
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As we head into 2025, it’s important to examine Nvidia’s prospects and whether its stock remains an attractive option for investors.
Image source: Getty Images.
Upcoming Events to Watch
A variety of factors could influence Nvidia’s stock in early 2025. Notably, CEO Jensen Huang is a well-known figure in the investing world, often stirring excitement with his appearances. He is set to deliver the keynote address at the Consumer Electronics Show (CES) on January 6. Investors will closely watch this event.
Huang is expected to share insights on AI adoption trends and the overall tech landscape. He may also provide updates on Nvidia’s Blackwell platform, designed specifically for AI applications. The new processor began shipping recently, and Huang has previously characterized demand for these chips as “insane.” A positive outlook from Huang could further elevate Nvidia’s stock price.
Furthermore, Citi analyst Atif Malik placed Nvidia on a “positive catalyst watch” before Huang’s speech. He maintains a buy rating with a price target of $175, indicating a potential 25% upside from the current price. Malik anticipates that updates on Blackwell sales and the prospect of improving profit margins could positively affect the stock.
It’s essential to understand current uncertainties regarding Nvidia’s profit margins. The company achieved a record gross profit margin of 78.4% in its fiscal Q1 of 2025 (ending April 28). However, margins fell to 75.1% and 74.6% in the following quarters. Management attributed these declines to “inventory provisions” linked to the Blackwell launch. They project margins around 73% for the current quarter. While profit margin declines can raise concerns, this decline over just two quarters may not be significant, especially considering the remarkable performance seen in Q1 and the upcoming product launch.
The most critical event to anticipate is Nvidia’s fiscal Q4 2025 financial report due on February 26. The company forecasts revenue of $37.5 billion, suggesting a growth rate of about 70%. Historically, Nvidia has issued conservative forecasts. For example, they predicted 79% growth in Q3 but achieved approximately 94%. If Blackwell shipments exceed expectations—as has often been the case—the company may outperform Wall Street predictions, possibly boosting the stock further.
Moreover, overly cautious concerns about stalled AI adoption may not reflect reality. A study by PwC estimates that AI could contribute up to $15.7 trillion to the global economy by 2030, indicating that 45% of economic gains may stem from AI-related product enhancements.
Is Now the Time to Invest in Nvidia?
Investors should also consider Nvidia’s valuation before making any decisions. Earlier this year, following the AI craze, Nvidia’s stock was priced at 83 times earnings. That ratio has since decreased to 55 times earnings, but in historical context, this is relatively low. Nvidia’s average price-to-earnings (P/E) ratio over the last decade has been 59, suggesting that the current valuation may be appealing.
Furthermore, Nvidia is projected to achieve earnings per share (EPS) of $4.43 in fiscal 2026, translating to 32 times next year’s expected earnings. This is an attractive valuation for a company with a strong growth trajectory.
Considering Huang’s upcoming CES presentation, the promising Blackwell AI processor, potential margin improvements, favorable valuation, and Nvidia’s significant role in AI innovation, there appears to be upside potential as we approach 2025.
Nevertheless, investors should tread carefully. Any catalyst could negatively impact the stock price temporarily.
If you believe, as I do, that AI will dramatically alter industries and that Nvidia is a key player in this evolution, then purchasing Nvidia stock now could prove to be a wise decision despite when you buy it.
Should You Invest $1,000 in Nvidia Today?
Before proceeding with an investment in Nvidia, it’s essential to consider that the Motley Fool Stock Advisor analyst team recently highlighted the 10 best stocks for investor consideration, and Nvidia did not make the list. These stocks have strong potential for tremendous returns in the future.
Reflecting on Nvidia’s past, if you had invested $1,000 when the stock was recommended on April 15, 2005, you would have $839,670!*
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*Stock Advisor returns as of December 23, 2024
Citigroup is an advertising partner of Motley Fool Money. Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily represent those of Nasdaq, Inc.
