Nvidia was valued at $2 trillion in 2024 and is now one of the world’s largest companies by market capitalization.
It’s been another great year, especially for technology stocks. Fueled by artificial intelligence (AI), the S&P 500 index rose 23%, while the Nasdaq Composite Index rose a whopping 29%.
The “Magnificent Seven” stocks were among the stocks that rose the most on the market that year, and no stock attracted more attention than semiconductor giant Nvidia, which achieved the best performance on the Dow Jones Industrial Average in 2024. Probably not.
Last year, Nvidia had a market capitalization of about $2.1 trillion, the most of any company. This has made Nvidia one of the most valuable companies in the world. While Nvidia’s current performance may suggest the stock is due for a downturn, Dan Ives, a technology analyst at Wedbush Securities, believes the AI darling has more growth potential. He claims to be waiting, and I agree.
Let’s take a look at Nvidia’s latest catalyst and discuss why 2025 could be a new record.
The stars align for Nvidia in 2025
Over the past two years, Nvidia has emerged as a leader in the AI marathon, and it all comes down to the graphics processing unit (GPU). GPUs are advanced chipsets required for developing generative AI applications.
Nvidia’s extensive array of GPUs has helped the company capture an estimated 90% of the GPU market, separating it from competitors such as Advanced Micro Devices.
NVDA Earnings (Quarterly) Data by YCharts.
To add some context here, Nvidia’s dominance has driven the company’s consistent revenue and profit growth, allowing it to double down on research and development (R&D) and pioneer new and more innovative products. Enter Blackwell, Nvidia’s next generation GPU architecture. This is reportedly already sold out over the next 12 months.
While this is more of an enterprise-specific tailwind, Ives believes widespread investment in AI infrastructure could exceed $1 trillion over the next few years. Nvidia has reaped the windfall of increased capital spending (Capex) backed by its investment in European GPU cluster specialist Nebius and its acquisition of AI infrastructure business Run:ai for a reported $700 million. I am using it.
Image source: Getty Images.
Should you buy Nvidia stock now?
Given the significant rise in Nvidia’s stock price, it would be wise to examine some of the company’s valuation metrics and cross-reference them with the catalysts discussed above.
Data source: YCharts.
On the surface, the above valuation multiples may give the illusion that Nvidia is an expensive stock. However, Nvidia’s valuation profile looks quite convincing considering the company’s P/E and P/FCF are now significantly lower than they were a year ago. Essentially, the company’s earnings are accelerating faster than its enterprise value (price, or market cap), so NVIDIA’s valuation can actually be considered quite reasonable.
Additionally, a PEG ratio of 1 means that Nvidia is currently fairly valued. I think it’s very hard to predict what Nvidia’s revenue profile will be over the next few years as Blackwell and the company’s peripheral investments begin to bear fruit.
Not only do I view Nvidia as a good buy right now, but I also think the company could be the first to enter exclusive territory, the $4 trillion club, in 2025. I’m looking forward to seeing how Nvidia performs this year. And we think this stock is currently an attractive buying opportunity for AI investors and growth investors alike.
Adam Spatacco holds a position at Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Nebius Group, and Nvidia. The Motley Fool has a disclosure policy.
