Nvidia‘s (NASDAQ: NVDA) stock skyrocketed 16% to hit an all-time high on Feb. 22 following its latest earnings release, which blew past Wall Street’s predictions. In the fourth quarter of fiscal 2024, ending on Jan. 28, the company’s revenue surged a staggering 265% year over year to $22.1 billion, outpacing expectations by $1.6 billion. Its adjusted earnings shot up by 486% to $5.16 per share, eclipsing the consensus forecast by $0.52.
For the full fiscal year, Nvidia witnessed a remarkable 126% revenue jump to $60.9 billion, with adjusted EPS soaring 288%. This marked a significant turnaround from its previous flat revenue growth and 25% adjusted earnings decline in fiscal 2023.
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Nvidia’s 280% surge in the past year boosted its market cap to $1.96 trillion, positioning it as the world’s third-most valuable company, trailing only Microsoft (NASDAQ: MSFT) at $3.06 trillion and Apple at $2.85 trillion. The question now arises: Can Nvidia surpass Apple and dethrone Microsoft by 2025?
Unleashing Nvidia’s Growth Spurt
The recent surge in Nvidia’s fortunes can be solely attributed to the explosive expansion of the artificial intelligence (AI) market. Nvidia’s top-tier data center GPUs excel in processing complex AI tasks more efficiently than standalone CPUs, drawing companies to purchase these chips to keep stride with the burgeoning generative AI platforms like OpenAI’s ChatGPT.
All major AI-focused entities, including OpenAI, its primary supporter Microsoft, Amazon, Alphabet‘s Google, and Meta Platforms, rely on Nvidia’s GPUs. Despite stumbling blocks in China due to export constraints over the past year, the market’s hunger for Nvidia’s GPUs continues to outstrip its supply by a significant margin.
In fiscal 2024, Nvidia derived 78% of its revenue from data center chips, a notable leap from 56% in fiscal 2023. This rapid growth has helped reduce its reliance on gaming GPUs, which historically formed the bulk of its revenue but faced vulnerability in the post-pandemic PC market and the unpredictable crypto mining sector.
Forecasting Nvidia’s Value in 2025
Optimistic predictions suggest that Nvidia will maintain its dominance in the AI domain, even as competitor AMD enters the arena with its more economical data center GPUs, and tech giants like Meta and Google venture into developing their in-house AI GPUs. Analysts envision Nvidia’s revenue growing at a compound annual growth rate (CAGR) of 35% from fiscal 2024 to fiscal 2027, coupled with an EPS surge at a CAGR of 37%.
Although Nvidia’s stock isn’t a bargain at 35 times forward earnings and 18 times current sales, it appears reasonably priced considering its growth trajectory. If it continues to maintain these valuations, meets analyst projections, and retains a forward earnings multiple of 35 by the onset of fiscal 2027 (commencing Jan. 2026), the stock could potentially reach $1,085 per share, translating to a market cap of around $2.7 trillion by late 2025, a nearly 40% gain from its current standing.
The Microsoft Conundrum
However, casting doubt on whether Nvidia could overtake Microsoft by 2025, the tech behemoth has also tapped into the AI market’s boom through significant investments in OpenAI and integrating generative AI tools into its cloud services. Analysts predict Microsoft’s revenue and earnings to climb at 15% and 17% CAGR, respectively, from fiscal 2023 to fiscal 2026.
Similar to Nvidia, Microsoft trades at 35 times forward earnings. If it maintains this premium valuation and aligns with Wall Street’s expectations, it could potentially hit $550 per share, boasting a market cap of $4.1 trillion by early 2026.
Looking Beyond Market Caps
Essentially, Nvidia faces an uphill battle to surpass Microsoft unless the bulls irrationally elevate its valuations to unsustainable levels or Microsoft falters and gets reassessed as a slower-growth entity.
Instead of fixating on these unlikely scenarios, investors should concentrate on Nvidia’s growth potential over fretting about its market capitalization. The company is still riding the AI gold rush, equipped with tools for success, and has ample room for growth before external factors like AMD’s GPUs or proprietary chips significantly hamper its progress.
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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Randi Zuckerberg, former market development director and spokesperson for Facebook, and sibling to Meta Platforms CEO Mark Zuckerberg, is also on The Motley Fool’s board of directors. John Mackey, ex-CEO of Whole Foods Market, an Amazon subsidiary, is part of The Motley Fool’s board of directors. Leo Sun is invested in Amazon, Apple, and Meta Platforms. The Motley Fool has positions in and suggests Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool advocates for long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool adheres to a disclosure policy.
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