The AI Boom: Nvidia’s Unstoppable Ascent
In recent months, AI stocks have propelled market indexes to new heights. Investors are optimistic about how this technology will boost company earnings and foster groundbreaking advancements. Many businesses are benefiting from tools essential for AI’s infrastructure expansion, leading to noticeable gains in their stock prices.
Nvidia has distinguished itself as a prominent player in this trend. Last year, its stock increased by 171%, topping the Dow Jones Industrial Average. Over five years, Nvidia’s stock astonishingly rose by 1,800%, fueled by continuous double- and triple-digit revenue growth attributed to its AI products.
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Looking ahead, Nvidia seems poised for more growth, with forecasts suggesting a potential stock increase of 30% from its current price over the next year.
Image source: Getty Images.
Nvidia’s Dramatic Revenue Growth
Originally focused on the video gaming sector, Nvidia transformed its business model after discovering that its advanced chips could be used across various industries. Today, it ranks as the world’s leading designer of graphics processing units (GPUs) for AI. The company’s quarterly revenue skyrocketed from $7 billion three years ago to over $35 billion today.
As a result, investors have flocked to Nvidia, which has become synonymous with artificial intelligence technology.
However, the dramatic stock appreciation has raised questions about Nvidia’s valuation and its capacity for continued growth. Investors understand that stocks are not guaranteed to rise indefinitely, making it likely that Nvidia might experience a slowdown at some point.
Recent news has highlighted this concern; last month, Nvidia’s stock saw a decline after a start-up named DeepSeek used less powerful Nvidia chips to train its model. This development raised fears that major tech firms might cut back on spending for Nvidia’s premium GPUs.
Wall Street’s Projections for Nvidia
Despite the recent concerns, Wall Street remains confident in Nvidia, with an average price target of around $172—a forecast indicating a possible 30% increase in the coming year. But is this projection attainable?
Importantly, while the DeepSeek news caused some decline, it is unlikely to have a significant effect on Nvidia’s overall revenue. Major customers, including Meta Platforms and Alphabet, have recently announced plans to increase their investments in AI, suggesting they will continue to use Nvidia’s latest GPU offerings.
While temporary pullbacks in Nvidia’s stock might occur as investors take profits, the company’s leading position in chip performance and commitment to innovation—illustrated by its annual GPU updates—should stave off threats to its market share. Nvidia is currently unveiling its Blackwell architecture, which has seen demand outstrip supply.
Chips at the Forefront of AI Development
Nvidia is also well-positioned to play a significant role in the next phases of AI, particularly in applying AI solutions to real-world challenges. The company produces some of the most powerful chips for inferencing—an essential process whereby AI models analyze and solve complex problems. Additionally, Nvidia’s software platform supports businesses in the AI development process, further contributing to its growth potential.
While Nvidia’s shares might experience fluctuations, Wall Street’s expectation of further gains is reasonable. In the long run, Nvidia has the potential to maintain its dominance in the AI sector, securing ongoing earnings growth—a promising sign for long-term investors.
Is Now the Right Time to Invest in Nvidia?
Before purchasing Nvidia stock, consider the following:
The Motley Fool Stock Advisor analyst team has recently highlighted the 10 best stocks for investment, and Nvidia is not among them. The stocks selected could yield significant returns moving forward.
Reflect on the historical context: When Nvidia was recommended on April 15, 2005, an initial investment of $1,000 would be worth $813,868 today!*
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*Stock Advisor returns as of February 7, 2025
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also on the board. Suzanne Frey, an executive at Alphabet, is a member of this board as well. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and 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.
