Should You Consider Investing in Nvidia Before 2025?
Nvidia (NASDAQ: NVDA) is dominating stock performance this year. With an anticipated increase of nearly 190%, it boasts the best performance in the Dow Jones Industrial Average, the second-best in the Nasdaq 100, and third-best in the S&P 500. The driving force behind these impressive gains is Nvidia’s stronghold in the booming artificial intelligence (AI) sector, a market projected to grow from $200 billion today to $1 trillion by the end of the decade.
This tech giant is renowned for its powerful chips that are essential for AI development, alongside a diverse portfolio of products and services. Recently, Nvidia reported a remarkable revenue of $35 billion in one quarter—more than its total revenue for the entire year just two years prior.
Image source: Getty Images.
Nvidia’s Journey: From Gaming to AI Leader
To understand Nvidia’s current standing, we need to consider its origins. Initially, Nvidia focused on graphics processing units (GPUs) for video games. As its technology advanced, the company recognized that GPUs could perform multiple tasks effectively, leading to the launch of the CUDA parallel computing platform. This expansion positioned Nvidia as a key player in the AI revolution.
In recent financial quarters, Nvidia’s earnings surged into triple digits. The latest quarter showed a growth slowdown to the double digits, but that was expected due to comparisons with previous record earnings. For instance, the company registered revenue of $18 billion in the third quarter the prior year, and this year, it still achieved a 94% increase.
It’s crucial to note that Nvidia’s story isn’t solely about revenue; profitability plays a significant role as well. The company maintains a remarkable gross margin over 70%, and it projects that these margins will persist amid the upcoming launch of its new Blackwell architecture.
Reasons to Think Twice Before Buying Nvidia
While Nvidia’s stock may appear enticing, there are factors to consider before making a purchase. During product launches, Nvidia’s margins may remain strong, but transitioning processes could impact them slightly; the company has forecasted a drop in gross margin to the low-70% range. This, combined with Nvidia’s major gains in 2024, might encourage investors to explore alternative stocks with greater growth potential.
Nonetheless, Nvidia’s growth trajectory seems far from over. The entire AI market is on the verge of significant expansion, estimated at around $1 trillion for data center upgrades alone in the next four to five years, stated by CEO Jensen Huang. The upcoming Blackwell launch and the promise to update future chips annually will serve as catalysts for continued growth.
The Evidence Points to Nvidia as a Smart Investment
Given these developments, there is compelling evidence suggesting that investing in Nvidia soon could be advantageous. The company predicts it will surpass its forecast of billions in revenue from Blackwell this quarter.
Even waiting until after the New Year to invest in Nvidia could still yield strong returns, as long-term holding typically mitigates short-term market fluctuations. Therefore, it is not essential to rush your decision. However, for those looking to strengthen their portfolio before 2025, Nvidia should certainly be on the consideration list.
Is Now the Right Time to Invest $1,000 in Nvidia?
Before investing in Nvidia, it’s worth noting a recent observation:
The Motley Fool Stock Advisor analyst team has identified the 10 best stocks for investors right now, and Nvidia was not included. The chosen ten could provide tremendous returns over the coming years.
Reflecting on a past recommendation from Nvidia on April 15, 2005, if you had invested $1,000, that sum would now be worth $872,947!*
Stock Advisor offers an accessible strategy for building investment success, with ongoing portfolio guidance and fresh stock picks monthly. Since its inception in 2002, Stock Advisor has significantly outperformed the S&P 500.*
See the 10 stocks »
*Stock Advisor returns as of December 9, 2024
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. 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.
