AI Giants Race to $4 Trillion Valuation: Nvidia, Microsoft, and Apple Lead the Pack

Prediction: This Will Be the First Artificial Intelligence (AI) Stock To Reach a $4 Trillion Valuation in 2025 | The Motley Fool

Right now, there are only three companies in the world with a market cap of at least $3 trillion. These companies are Apple, Nvidia (NVDA 4.45%), and Microsoft -- each of which are playing a major role in the ongoing artificial intelligence (AI) saga. While Apple currently stands in the lead with a market cap around $3.8 trillion, I see Nvidia as the most likely among the trio to reach a $4 trillion valuation first. I'll detail Nvidia's tailwinds and make the case why I think the semiconductor darling has some major upside heading into 2025. Over the last two years, Nvidia's business has experienced something of a renaissance. While the company's original focus was on enhanced graphics performance for video games, Nvidia discovered that its graphics processing unit (GPU) chipsets could be integral for generative AI development. Given Nvidia's existing inroads in the GPU realm, the company has faced very little competition since AI emerged as a megatrend a couple of years ago. For this reason, the company has been able to command high levels of pricing power for its chips, which has led to record revenue and profit growth for the company. Moreover, demand for Nvidia's Hopper GPUs has helped the company acquire nearly 90% of the GPU market -- a trend that could actually continue climbing higher. In 2025, the narrative around Nvidia is going to surround on item: the company's next-generation Blackwell GPU architecture. According to industry analyst Beth Kindig, production of Blackwell GPUs is expected to triple between the current quarter (Q4) and the first quarter of 2025. While it's difficult to assess what these figures will translate to in terms of dollars, I see the rising production estimates as a good proxy for Nvidia's near-term growth. Although shares of Nvidia gained roughly 170% in 2024, the stock has taken a breather over the last month or so. I think one reason for the slight sell-off pertains to the Blackwell launch, as there is clearly a lot riding on Nvidia's ability to execute and maintain its position as the top chip business. Should the Blackwell launch exceed expectations (which appears likely), I think it's reasonable that Nvidia stock will witness some new life and shares could begin soaring once again. By contrast, while Apple and Microsoft each have catalysts of their own, such as the iPhone 16 equipped with Apple Intelligence and demand for Azure cloud computing infrastructure, I don't think either of these opportunities carry the same upside compared to what Blackwell could mean for Nvidia. Right now, Nvidia's market cap hovers around $3.3 trillion. In order to reach the $4 trillion milestone, Nvidia's value would need to increase by approximately 21%. While a move of this magnitude is certainly achievable, it's important to keep in mind that Nvidia executed a 10-for-1 stock split earlier in 2024. Since the company's outstanding share count is now higher by tenfold, it's highly unlikely that Nvidia stock will experience a 20% gain in a matter of just a few trading days. I think in order for Nvidia shares to rise by another 20% or more, the company is going to need to demonstrate consistent growth around Blackwell and the data center business as a whole. As such, I think smaller, incremental moves will occur in Nvidia stock throughout 2025 as more information becomes public related to Blackwell.

Prediction: 2 AI Stocks Will Be Worth More Than Apple Stock by the Year's End in 2025 | The Motley Fool

Apple had a market value of $3.7 trillion as of Dec. 31, making it the most valuable U.S. company, a title it has held for the better part of the last decade. But Apple has yet to demonstrate its ability to monetize artificial intelligence, at least not to the same degree as other big tech companies. Not surprisingly, Wall Street expects Apple stock to trade sideways during the next year. In fact, the median 12-month target of $250 per share implies downside from its current share price of $251. It also gives Amazon (AMZN 1.80%) and Nvidia (NVDA 4.45%) a shot at surpassing Apple's current valuation. Admittedly, the first prediction is much more aggressive than the second, and the one least likely to be correct. But I think both outcomes are plausible this year. Here's why. Amazon reported impressive financial results in the third quarter. Revenue increased 11% to $159 billion on especially strong sales growth in the advertising and cloud computing segments. Operating margin expanded more than 3 percentage points as the company made fulfillment more efficient, and GAAP earnings rose 52% to $1.43 per diluted share. Looking ahead, the investment thesis is threefold: Amazon runs the largest e-commerce marketplace in North America and Western Europe, it is the third-largest ad tech company worldwide, and Amazon Web Services is the largest public cloud. That last point is especially important because it means Amazon is ideally positioned to benefit as demand for artificial intelligence (AI) draws more businesses to the cloud. Wall Street estimates that Amazon's earnings will increase 26% in the next 12 months. That consensus makes the current valuation of 47 times earnings look reasonable. Those figures give a price/earnings-to-growth (PEG) ratio of 1.9, which is a material discount to Apple's PEG ratio of 3.6. If Amazon tops earnings estimates by even a small margin, its valuation multiple may expand to the point where its market value reaches $3.8 trillion. Admittedly, the probability is slim that Amazon shares will advance 65% this year. Even so, patient investors should still consider purchasing a small position today. Indeed, only four companies in the S&P 500 index have a higher percentage of buy ratings than Amazon, according to FactSet Research. Semiconductor company Nvidia reported solid financial results in the third quarter of fiscal 2025, which ended in October 2024. Revenue increased 94% to $35 billion on particularly strong sales growth in the data center segment, driven by demand for AI hardware and software. Meanwhile, non-GAAP net income increased 103% to $0.81 per diluted share. Looking ahead, the bull case is straightforward: Nvidia graphics processing units (GPU) are the gold standard in accelerating computationally demanding data center workloads like artificial intelligence. Indeed, Forrester Research analysts recently wrote, "Nvidia sets the pace for AI infrastructure. Without Nvidia's GPU, modern AI wouldn't be possible." The company has an important catalyst on the horizon in the launch of its Blackwell GPU, which can complete AI training tasks up to four times faster and AI inference tasks up to 30 times faster than the previous Hopper architecture. Blackwell production ramped in the current quarter, so Nvidia should see substantial revenue from its next-generation chip in the coming year. Wall Street estimates that Nvidia's earnings will increase 50% in the next 12 months. That consensus estimate makes the current valuation of 51 times earnings look downright cheap. Nvidia stock could easily return 16% if the company reports earnings that align with expectations in the coming quarters, and shares could advance even more if it exceeds estimates. Regardless, patient investors should feel comfortable buying a few shares today. In the previous section, I wrote that only four companies in the S&P 500 have a higher percentage of buy ratings than Amazon. Nvidia is in a similar position. Only six companies in the S&P 500 have a higher percentage of buy ratings than Nvidia, according to FactSet Research.

Nvidia: 180 Billion Reasons Why This Artificial Intelligence (AI) Stock Could Skyrocket in 2025 | The Motley Fool

Semiconductor-giant Nvidia (NVDA 0.35%) had a terrific 2024, but a closer look at its recent stock-price chart shows that it's entering the new year on shaky ground, thanks to doubts about the company's ability to maintain its impressive pace of growth. More specifically, Nvidia stock is down more than 6% since releasing its fiscal 2025 third-quarter results on Nov. 20, 2024. Though the chipmaker's revenue and earnings crushed expectations last quarter and its guidance exceeded expectations, investors seem concerned about the potential pressure on Nvidia's margins, thanks to the ramp up of its Blackwell artificial intelligence (AI) processors, as well as the deceleration in its top-line growth. However, savvy investors would do well to look beyond these concerns, as there's a big catalyst that could help Nvidia regain its mojo in 2025. According to various reports, investment banking and financial services provider Jefferies estimates that Nvidia could ship approximately 6 million data center graphics processing units (GPUs) in 2025, helping the chipmaker generate $180 billion to $200 billion in revenue. And Jefferies' forecast is on the conservative side when compared to the buy-side estimate of $205 billion to $215 billion. Morgan Stanley, for instance, expects Nvidia to generate $210 billion in revenue from sales of its Blackwell systems alone in 2025, indicating that its overall data center revenue could be much higher, considering that the company will continue selling its previous generation Hopper processors in 2025. But even if Nvidia manages to achieve at least $180 billion in data center GPU revenue in 2025, it would be a big improvement over its potential data center revenue for 2024. In the first nine months of fiscal 2025 (which ended on Oct. 27, 2024), Nvidia's data center revenue stood at $79.6 billion. However, this figure also includes the sales of Nvidia's data center networking chips. Nvidia sold $69.6 billion worth of data center GPUs in the first three quarters of fiscal 2025, with the remaining $10 billion attributable to sales of its networking products. Data center GPUs alone accounted for 76% of the $91 billion revenue that Nvidia generated in the first nine months of the fiscal year. The company has guided for $37.5 billion in revenue for the fourth quarter of fiscal 2025 (which will end in January 2025). Assuming a 75% revenue contribution from data center GPUs in fiscal Q4, as well, Nvidia's revenue from sales of these chips could land at $28 billion. Adding that figure to the data center revenue that Nvidia has generated in the first nine months, the company is likely to end fiscal 2025 -- which coincides with 11 months of calendar 2024 -- with $97.6 billion in data center GPU revenue for the year. Jefferies' estimate suggests that Nvidia's data center GPU sales could jump at least 84% in fiscal 2026, which will coincide with the majority of calendar 2025. Jefferies' $180 billion estimate is based on an average selling price of $30,000 for each data center GPU that Nvidia sells. That's not surprising, as the company is expected to price its Blackwell processors between $30,000 and $40,000. However, that price range also means that there's market for a higher average selling price, which could allow Nvidia to generate stronger data center GPU revenue in 2025. Meanwhile, there are other estimates that point toward higher shipments of Nvidia's data center GPUs in the new year. So there's a possibility that Nvidia could generate stronger-than-expected data center GPU revenue in the coming fiscal year. In addition, Jefferies' forecast indicates that Nvidia could generate an incremental $82.4 billion in data center GPU revenue next year (calculated by deducting fiscal 2025's estimated revenue of $97.6 billion from $180 billion). Assuming Nvidia's other businesses remain stagnant, its top line could land at $211 billion in fiscal 2026 (arrived at by adding $82.4 billion to Nvidia's estimated fiscal 2025 revenue of $128.5 billion). However, the company has been enjoying growth in all of its other end markets, as well, which indicates it could be on track to crush the average revenue estimate of $195 billion for fiscal 2026. The discussion above tells us that Nvidia seems set to deliver another year of outstanding growth in 2025 that could outpace analysts' expectations. That's why savvy investors will do well to buy this AI stock while it's still trading at an attractive 32 times forward earnings, which is lower than the Nasdaq-100 index's earnings multiple of 33 (using the index as a proxy for tech stocks). Moreover, Nvidia's price/earnings-to-growth ratio (PEG ratio) stands at 0.98, according to Yahoo! Finance. This is another indicator that Nvidia is worth buying right now, as a PEG ratio of less than 1 means that a stock is undervalued in light of its earnings growth potential -- which could be stronger than expected in 2025 and help shares skyrocket, once again, following the recent sluggishness.

Nvidia Stock Jumped Today -- Is the Artificial Intelligence (AI) Leader a Buy for 2025? | The Motley Fool

Nvidia stock saw bullish momentum in today's trading following news about Microsoft's planned AI infrastructure spending for 2025. Microsoft is the semiconductor specialist's largest customer and purchases more advanced graphics processing units (GPUs) from it than any other major tech player. On the heels of today's gains, Nvidia stock is now up 200% over the last year of trading. Nvidia stock's incredible run naturally raises questions about whether investors can still score significant wins with the AI leader. On the other hand, the company's high-performance GPUs continue to be the foundation-level hardware powering advanced AI applications -- and the chip leader maintains a strong competitive edge in the space. Most analysts suggest that the company has a market share of at least 80% in the booming AI chip market. Depending on how the category is sliced, some breakdowns suggest that Nvidia has a market share well above 90% when it comes to the most important and profitable categories of the AI chip market. With that market dominance in mind, recent commentary from Microsoft looks very bullish for Nvidia. In a recent blog post, Microsoft Vice Chair and President Brad Smith said that the company is planning to invest roughly $80 billion in AI data centers this year. With the software giant expected to record capital expenditures (capex) of roughly $53 billion in 2024, that implies that the company's spending on AI infrastructure will increase at least 51% in 2025. Given that the 2024 capex figure included spending on some other categories, growth for AI data center investments could come in significantly above that level -- and Nvidia looks poised to be the prime beneficiary. Massive gains for the stock and the historically cyclical nature of the business have made Nvidia's stock outlook more speculative, but the recent commentary from Microsoft is a very bullish indicator. With signs that demand for hardware to build out AI infrastructure is still expanding at a rapid clip, Nvidia stock continues to look like a worthwhile buy for long-term investors.

2 Artificial Intelligence (AI) Stocks to Buy Before They Soar to $4 Trillion in 2025, According to a Wall Street Analyst | The Motley Fool

Equity analyst Dan Ives has made a quite a few prescient calls in his career. In the last year alone, he predicted the Nasdaq Composite would hit 20,000, and he remained bullish on Palantir despite widespread skepticism. Lo and behold, the Nasdaq hit 20,000 in 2024, and Palantir was the best-performing stock in the S&P 500 index. This year, Ives thinks Apple (AAPL -0.20%) and Microsoft (MSFT 1.14%) will become the first $4 trillion companies, as detailed below: Here's what investors should know about Apple and Microsoft. In 2024, consultancy Brand Finance ranked Apple as the most valuable brand in the world for the third time in four years. Apple is best known for its premium electronics devices, but the company has also built loyalty through its services business, which includes value-added products like iCloud storage, Apple Pay, and Apple TV+. Apple was slow to respond to the artificial intelligence (AI) boom, but the company late last year introduced Apple Intelligence, a suite of AI features available on newer iPad, iPhone, and MacBook models. While the initial response has been somewhat muted in terms of consumer demand, CEO Tim Cook recently told analysts it would usher in a "new era for the iPhone." Dan Ives is equally optimistic. He thinks Apple Intelligence will be the catalyst that drives a massive upgrade cycle. In fact, Ives in a September interview with Schwab Network predicted Apple would record its strongest iPhone unit sales in history in the next year. And more recently, he said the upgrade cycle could drive the company's market value to $5 trillion within 18 months. Apple reported pretty good financial results in the fourth quarter of fiscal 2024, which ended in September. Revenue rose 6% on mid-single-digit growth in MacBook, iPad, and iPhone sales, and double-digit growth in services. Meanwhile, non-GAAP net income climbed 9% to $25 billion, but earnings per share jumped 12% as the company continued to repurchase stock aggressively. Apple Intelligence could certainly be a major catalyst in the coming years, especially given that Apple is the revenue leader in the smartphone market. But management has yet to articulate a long-term strategy that incorporates AI into the services business. Ives says the company will monetize Apple Intelligence with App Store fees as developers build AI into mobile applications. But without some input from management, I find it difficult to be bullish. Adding to my skepticism, Apple currently trades at 40 times earnings. That is well above the three-year average of 29 times earnings, and the multiple itself is hard to justify when Wall Street expects the company's earnings to increase at 10% annually in the next three years. Dan Ives has an excellent reputation, but I think investors should wait for a better entry point, or else more evidence that Wall Street has grossly underestimated future earnings. Microsoft is the largest software company in the world in terms of revenue. While it is best known for its office productivity tools, the company also has a strong presence in other verticals, including business intelligence, enterprise resource planning, and cybersecurity. Microsoft has introduced generative AI copilots that create new monetization opportunities across its software portfolio. Beyond software, Microsoft has a strong presence in cloud computing. Its Azure unit is the second-largest cloud infrastructure and platform services provider in terms in terms of sales, and it's well positioned to gain share. Its partnership with OpenAI is a key advantage because it makes Azure the exclusive cloud provider to the AI start-up. That lets Microsoft indirectly monetize ChatGPT usage, and it allows Azure customers to build generative AI applications with OpenAI models. Microsoft reported reasonably good financial results in the third quarter. Revenue rose 16% to $65.6 billion on strong sales growth in software, cloud services, and advertising, though its acquisition of Activision added 3 points to top-line growth. But GAAP earnings rose just 10% to $3.30 per diluted share as investments in AI infrastructure weighed on gross margin. The company also gave disappointing guidance, causing shares to slide following the report. One reason for the weak guidance is an anticipated $1.5 billion headwind to income in the current quarter due to its share of losses at OpenAI. But that is a temporary problem. Per the terms of the partnership, Microsoft should not only recoup its $13 billion investment in the AI start-up, but will also collect a hefty portion of its earnings once the company reaches profitability. In other words, the headwind should eventually become a tailwind. The partnership with OpenAI also creates an onramp to Azure. For instance, usage of Azure OpenAI -- a service that lets developers access OpenAI models -- more than doubled in the past six months. That has contributed to the company's ability to monetize AI, and Microsoft is on pace to earn $10 billion in AI revenue in the next quarter. No product in company history hit that milestone faster, according to CEO Satya Nadella. While the business is solid, Microsoft's valuation is also expensive. The stock trades at 35 times earnings, a premium to the three-year average of 32 times earnings. And the multiple itself is hard to justify when Wall Street expects earnings to grow at 13% annually in the next three years. Again, Ives has an impressive track record where technology stocks are concerned, but I think investors should wait for a better entry point.

Prediction: Nvidia Will Dominate the AI Chip Market in 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. 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 a member of The Motley Fool's board of directors. Jose Najarro has positions in Advanced Micro Devices, Alphabet, Marvell Technology, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and Marvell Technology and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

Nvidia Just Reached a $30 Billion Milestone. Is the Stock a Buy for 2025? | The Motley Fool

This year has been one of milestones for top tech company Nvidia (NVDA -2.09%). The artificial intelligence (AI) chip leader delivered record earnings quarter after quarter as demand for its products and services soared. Thanks to a triple-digit share price gain, the company even temporarily became the largest by market value -- surpassing Apple. Nvidia also won a spot among the elite, with an invitation to join the Dow Jones Industrial Average, and the stock became the best performer on the benchmark for the year. It's clear that this AI powerhouse has been firing on all cylinders. But the string of milestones isn't over. The company just reached yet another one, worth about $30 billion and showing exactly how important this stock is to investors right now. Let's take a closer look and consider whether Nvidia stock is a buy for 2025. First, though, a quick summary of the Nvidia story so far. The company makes the world's top-performing graphics processing units (GPUs), a type of chip that mainly powered video games in its earlier days. But the GPU's ability to process many tasks at once made it a natural for other areas too. That's how and why the GPU expanded into AI. In fact, this chip plays a central role in crucial AI tasks -- such as the training and inferencing of large language models. As a result, Nvidia's revenue has exploded higher in recent years. For example, in the latest quarter, revenue came in at a record of more than $35 billion -- higher than a full year of revenue just two years ago. Importantly, the company is also highly profitable on sales, with a gross margin of more than 70% in recent quarters. Nvidia even expects gross margin to remain above 70% during the launch of its Blackwell architecture. This illustrates the strength of the company's cost structure -- because launches, involving new logistics and manufacturing processes, generally weigh on profit. As mentioned above, this tech giant has reached milestone after milestone over the past year, and now it's finishing up 2024 with yet another one. Nvidia is on its way to becoming the most-bought security by retail investors this year. Retail investor purchases represented nearly $30 billion in net inflows into Nvidia as of Dec. 17, according to Vanda Research. Last year, Nvidia was only the No. 4 most-purchased stock, with about $11 billion in inflows, and Tesla took the top spot. The data also show that net inflows from retail investors into Nvidia have increased by nine-fold from 2021. So, regular investors like you and me have piled into Nvidia in recent times, and the company has become a key part of many portfolios. But does Nvidia have what it takes to continue being an investor favorite, and is the stock a buy for 2025? Nvidia's popularity among investors has driven valuation higher. Today, the stock trades for 47x forward earnings estimates, around its most expensive level this year. Still, it's not a ridiculously high level for a growth stock, especially one operating in a dynamic industry that's in the early days of its story. Nvidia CEO Jensen Huang says that about $1 trillion in outdated computers operate in the world today, and they'll need to be updated for accelerated computing. This suggests that a lot more growth could be ahead for Nvidia over the long term. Something big is happening in the near term that could continue pushing Nvidia stock higher. As mentioned, Nvidia is launching Blackwell, a move that's already started with a production ramp during this current quarter. Blackwell is a fully customizable system, with seven different chips, various networking options and more -- and its performance could be a game-changer for users. Speaking of users, they've been lining up to get in on Blackwell for quite some time, with demand reaching "insane" levels, as Huang said during a CNBC interview this fall. Nvidia even says it expects several billion dollars in Blackwell revenue during this first quarter of commercialization. All this means that Nvidia, even after its gains this year, has what it takes to continue attracting retail investors and landing at the top of their investing lists. This popularity doesn't make the stock a buy -- but other elements do. Nvidia's market leadership, its focus on innovation, and the launch of Blackwell could drive this stock higher in the weeks and months to come, making it a top stock to add to your portfolio for 2025.

Nvidia vs. AMD: Which Is the Better AI Chip Stock for 2025? | The Motley Fool

Graphic processing units (GPUs) serve as a key component in the foundation of the world's artificial intelligence (AI) infrastructure build-out. Training AI models and running AI inference demands high-speed processing power, and it creates computational workloads that can best be handled using parallel processing. That positions GPUs -- originally developed to speed up the rendering of video game graphics -- as some of the best hardware options for providing the right type of processing power. Two companies dominate the GPU market. Nvidia (NVDA -2.09%) is by far the leader in the space. Rival Advanced Micro Devices (AMD 0.10%), meanwhile, is trying to take Nvidia on and gain a meaningful share of the data center market. In 2024, Nvidia's stock has been the clear winner, trading up by about 175% as of this writing. AMD stock, meanwhile, is down by about 15% on the year. But which stock is likely to perform better in 2025? The outlook for the GPU market continues to look strong. Most large hyperscalers (companies that operate mega-sized data centers) have already indicated that they plan to increase their AI-related capital expenditures in 2025. Demand for cloud computing is soaring due to AI, and all the major cloud computing companies are working to expand their infrastructure to meet that demand. Meanwhile, GPU clusters are growing larger and larger as big tech companies and well-funded start-ups such as OpenAI and Elon Musk-owned xAI race to develop more sophisticated AI models. It is expected that Meta Platforms will use 160,000 GPUs to train its upcoming Llama 4 model -- 10 times as many as it used for Llama 3. The case is similar with xAi's Grok 3 model, which is expected to require 100,000, up from 20,000 used to train Grok 2. Meanwhile, there is talk of companies deploying clusters with as many as 1 million GPUs in the near future. Nvidia has been the biggest beneficiary of these companies' insatiable demand for GPUs, and its revenue has far outpaced AMD's. A big reason for this is that Nvidia long ago developed its free (but proprietary) CUDA software platform, which allows developers to program the GPUs they buy for tasks other than graphics rendering. As such, CUDA became the software platform on which many developers learned to program GPUs, creating a wide moat for the company. In the years since, Nvidia has added developer tools and AI-specific microlibraries through CUDA X, extending its software lead. Today, AMD has its own GPU software platform, and it makes GPUs that are just as powerful as Nvidia's, if not more so -- at least, on paper. However, testing by independent research and analysis company SemiAnalysis has concluded that AMD's software is holding back the performance of its GPUs. In its report, it called AMD's out-of-the-box experience "unusable," and said that it needed "multiple teams of AMD engineers" to help it fix software bugs. In the end, the paper specs for AMD's latest GPU did not match its real-world performance. By contrast, SemiAnalysis described the out-of-the-box performance of Nvidia's H100 and H200 GPUs as "amazing." This helps explain why Nvidia generated data center revenue of $30.8 billion last quarter compared to only $3.5 billion for AMD. Notably, though, both showed similar rates of data center revenue growth: Nvidia's rose by 112% and AMD's rose by 122%. Of course, Nvidia was doubling its revenue from a much larger base, which makes its performance all the more impressive. One area in which AMD has been able to carve out a niche for itself is AI inference. SemiAnalysis noted that AMD's customers tend to deploy its GPUs in inference, which presents narrow, well-defined use cases. As such, one way AMD could start to gain market share in the coming years is if more of the GPU market shifts from training to inference. AMD's GPUs are cheaper than Nvidia's, so such a shift could potentially benefit it. From a valuation perspective, AMD is a modestly cheaper stock, trading at a forward price-to-earnings (P/E) ratio of 24 compared to nearly 31 for Nvidia. However, Nvidia has been growing its total revenue more rapidly (94% vs. 18% last quarter) as at AMD, GPUs are just one piece of a larger hardware portfolio. At this point, I think AI training will remain important over the next several years as companies continue to try to develop more advanced AI models. As such, I much prefer Nvidia's stock as a holding from here and think investors could still profitably add it to their portfolios in 2025.

Should You Buy Nvidia Stock Before 2025? | The Motley Fool

There are plenty of catalysts on the horizon that could propel the chipmaker to new heights. There's no denying that 2024 has been a banner year for Nvidia (NVDA -2.09%). The company cemented its position as the gold standard for graphics processing units (GPUs) that underpin artificial intelligence (AI), and the future continues to look bright. Since the AI revolution kicked off in early 2023, the stock has gained more than 850%, with 182% gains this year alone. But this doesn't tell the entire story. Over the past six months, even as its business has continued to ramp up, Nvidia's stock price has stalled. Concerns about the future adoption of AI, the specter of competition, and a lofty valuation have sent some investors to the sidelines, wondering if the company's best days are behind it. Let's look at what lies ahead for Nvidia and if the stock still represents a compelling opportunity for investors heading into the new year. There are a number of catalysts that could move Nvidia stock in the early part of 2025, so investors should mark their calendars. CEO Jensen Huang is something of a rock star in the investing community. The popular chief executive tends to generate excitement that has the potential to move Nvidia's stock price whenever he makes public addresses. One such appearance is the opening of the Consumer Electronics Show (CES), as Huang is scheduled to give the keynote address on Jan. 6. Huang has his finger on the pulse of the technology industry and is expected to provide his views on the pace of AI adoption and the state of the technology in general. Perhaps more importantly, it's likely he will also give an update on demand for Nvidia's Blackwell platform. The next-generation processor, which is purpose-built for AI applications, was scheduled to begin shipping earlier this month. Huang has previously described demand for the chips as "insane," so expectations are high, and any positive update will likely give the stock a boost. In fact, Citi analyst Atif Malik put Nvidia on a "positive catalyst watch" ahead of Huang's appearance. The analyst maintains a buy rating and a price target of $175, which suggests potential upside of 25% compared to Tuesday's closing price. Malik believes an update on the sale of Blackwell and the potential for increasing margins could send the stock higher. It's worth taking a moment to review investor concerns regarding Nvidia's margins. The company's gross profit margin hit an all-time high of 78.4% during its fiscal 2025 first quarter (ended April 28). However, in the two quarters that followed, those margins slid to 75.1% and 74.6%. Management chalked those declines up to "inventory provisions" related to its upcoming Blackwell launch and is guiding for a gross profit margin of 73% in the current quarter. In some cases, declining profit margins can be a red flag over the longer term, but a decline over two quarters is too small a sample size for investors to be concerned -- particularly on the heels of a record-breaking performance in Q1 and an upcoming product launch. The most significant potential catalyst on the horizon is Nvidia's fiscal 2025 fourth-quarter financial report, which is scheduled to be released on Feb. 26. Management is guiding for revenue of $37.5 billion, which would represent growth of about 70%, though Nvidia has a long history of issuing conservative guidance. For example, after issuing a forecast for 79% growth in Q3, Nvidia delivered growth of roughly 94%. If Blackwell shipments end up being more robust than expected -- and history suggests it could -- the company could blow past Wall Street's expectations, which could also push Nvidia stock higher. Finally, investor fears that the adoption of AI could stall appear overblown. A study by Big Four accounting firm PwC estimates that AI has the potential to add as much as $15.7 trillion to the global economy by 2030. In fact, the data suggests that as much as 45% of all economic gains during the period could be the result of product enhancements from AI, sparking additional consumer demand. There's one final reason investors should consider buying Nvidia stock before 2025 -- its valuation -- but that requires some context. Early this year, when excitement regarding AI had reached a crescendo, Nvidia stock was selling for 83 times earnings. Over the course of the past year, however, that multiple has fallen steadily, and the stock is currently selling for 55 times earnings. While that might still seem expensive at first glance, it's worth putting into historical context. Over the past decade, Nvidia has had an average price-to-earnings (P/E) ratio of 59, which shows its current multiple is historically cheap. Furthermore, Nvidia is expected to generate earnings per share (EPS) of $4.43 in fiscal 2026, according to Wall Street. That works out to just 32 times next year's expected earnings, which is an appealing valuation for a company with such a sterling track record of growth. Taken together, Huang's upcoming appearance at CES, the blockbuster potential for Nvidia's next-generation Blackwell AI processor, the potential for improving margins, a compelling valuation, and the company's pivotal role in recent AI advances suggest there's potential upside over the near term. That said, investors looking to make a quick buck should exercise care. Any one of the aforementioned catalysts could go the other way, sending the stock lower, at least temporarily. Here's the thing: If you believe, like I do, that AI has the potential to transform industries and that Nvidia is one of the principal beneficiaries of this trend, then buy Nvidia stock and hang on for the wild ride to come. It doesn't matter if you buy the stock before 2025 -- as long as you buy it.

Why AI Chip Stocks Nvidia, Taiwan Semiconductor Manufacturing, and Arm Holdings Rallied Today | The Motley Fool

These three companies are each big beneficiaries of the AI buildout. However, each had also come under pressure through December as technology investors have taken profits after big two-year runs in these stocks. But a bullish blog post from AI leader Microsoft this morning got these three stocks moving higher again. Here's what was so positive about what Microsoft had to say, and why it may have tamped down some recent market fears. In a blog post this morning, Microsoft Vice President Brad Smith wrote bullishly on the prospects and importance of generative artificial intelligence. As part of the post, he also disclosed that Microsoft plans to spend a whopping $80 billion on AI data centers in the current fiscal year, which ends in June. That may have been a pleasant surprise to some. Microsoft has only reported one quarter of fiscal 2025, and only spent $14.9 billion in capital expenditures thus far. Therefore, the $80 billion figure given by Smith signals a steeper ramp-up in AI data center spending through June at least. While the $80 billion figure may have been the headline that caught attention, the larger thesis of the long blog post was similarly bullish long-term. In the post, which was addressed to the incoming presidential administration, Smith called AI the "electricity of our age," and advocated for three things: increased investment in AI, investments in skilling programs so that more Americans can work with AI, and finally, exporting American AI to allies across the world, so that others don't adopt competing AI solutions from China. Needless to say, increased investments in and usage of AI would benefit these three stocks. Nvidia is the dominant general-purpose AI chipmaker today. TSMC is similarly the dominant player in leading-edge chip production today, and obviously counts Nvidia as one of its most important customers, if not the most important. And Arm provides the low-power chip architecture used by many smartphone makers, which is also increasingly being adopted in low-power data center chips such as the Nvidia Grace CPU and the custom CPUs self-designed by large cloud providers. While the AI trade had a terrific year in 2024, some of these stocks had a disappointing December. Some reasons for the downdraft were fears over inflation, as well as the concern that the booming AI spend of the last two years may be coming to an end. In a December podcast, Microsoft CEO Satya Nadella noted that Microsoft would no longer be "chip-constrained" in 2025, as it was in 2024. That could have implied that either TSMC was ramping up the capacity to produce more Nvidia chips, or that demand for AI infrastructure was slowing down, or both. Of note, Microsoft is the biggest current buyer of Nvidia chips, so the statement kind of cast a shadow over Nvidia, especially after its monster gains up to that point. That is perhaps why Smith's blog post this morning was so reassuring for Nvidia and the entire semiconductor ecosystem. The $80 billion figure seemed to indicate the lack of chip constraints mentioned by Nadella last month was due to increased supply, and not necessarily a problem with demand. That's why not only Nvidia, but really the entire AI semiconductor ecosystem, got a big boost today.

Here's Why Nvidia Stock Could Double in 2025 | The Motley Fool

The past two years have been absolutely incredible for investors in Nvidia (NVDA -2.09%) as shares of the semiconductor giant more than doubled in both 2023 and 2024, rising 860% since the beginning of last year thanks to the effects that artificial intelligence (AI) has had on the company's revenue and earnings. In December 2023, I discussed the reasons shares of Nvidia could double in 2024. These included the robust demand for its graphics processing units (GPUs) for AI model training and inference, and the steps being taken by its manufacturing partner, Taiwan Semiconductor Manufacturing (NYSE: TSM), to ramp up supply. In this article, I will look at Nvidia's catalysts for 2025 and check why this high-flying chipmaker could double in value once again in the new year. The company's latest generation of GPUs built on its Blackwell architecture will be the biggest growth driver in 2025. Management said on its November earnings conference call that these chips are in full production and are being shipped to customers. Blackwell-related revenue for the current quarter should exceed expectations thanks to a strengthening supply chain. The company also said that the demand is well above supply. This bodes well for Nvidia going into the new year since TSMC says it will increase the production capacity of advanced AI chips significantly in 2025. Market researcher IDC projects that TSMC is on track to double its chip-on-wafer-on-substrate (CoWoS) advanced packaging capacity to 660,000 wafers to fulfill demand from Nvidia and other AI chipmakers. Nvidia reportedly cornered 60% of TSMC's CoWoS capacity for 2025, so it should be able to substantially increase the output of its Blackwell processors. In October 2024, Morgan Stanley analysts said that Blackwell GPUs are sold out for the next 12 months (according to a report on the website Tom's Hardware). That waiting time is likely to come down based on TSMC's outlook, allowing Nvidia to satisfy more orders and deliver a big bump in data center revenue. The company is expected to ship between 60,000 to 70,000 Blackwell B200 server systems in 2025, according to Morgan Stanley. Each system is expected to cost between $2 million and $3 million. That suggests its Blackwell systems could help generate somewhere between $120 billion to $210 billion next year, or $165 billion at the midpoint. Analysts expect Nvidia to hit $195 billion in revenue in fiscal 2026 (which will coincide with 11 months of calendar 2025), an increase of 51% from the current fiscal year's projected revenue of $129 billion. However, the potential revenue from Blackwell sales and the fact that Nvidia will continue to sell its previous-generation Hopper chips indicate that it could easily exceed Wall Street's growth expectations, and that could set the stage for the stock to double. Analysts expect Nvidia's earnings to increase 50% in the next fiscal year to an average of $4.43 per share, higher than the 12% growth that the S&P 500 index is expected to deliver. Investors should note that this average estimate for Nvidia has headed significantly higher in the past three months, rising from $3.99 per share 90 days ago and $4.03 per share 60 days ago. The high earnings estimate from the various analysts covering Nvidia for next year stands at $6.11. The potential jump in Nvidia's revenue and its impressive pricing power in the AI chip market could allow it to deliver stronger growth than analysts' expectations in 2025. Assuming Nvidia manages to clock $5 per share in earnings next year and trades at 55 times earnings at that time (in line with its trailing earnings multiple), its stock price could hit $275. That would be nearly double the current level. The reason I anticipate Nvidia will maintain its rich valuation after a year is because the market could reward it with a premium multiple thanks to the company's potential of outpacing the S&P 500's earnings growth by a significant margin. As such, investors would do well to continue holding Nvidia in their portfolios -- this AI stock's impressive growth could continue in the new year.

Nvidia Crushed This AI Chip Stock in 2024, but Can Things Change in 2025?

Jose Najarro has positions in Advanced Micro Devices and Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy. Jose Najarro is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through their link they will earn some extra money that supports their channel. Their opinions remain their own and are unaffected by The Motley Fool.

Nvidia's stock shows warning signs despite 177% yearly gain

Nvidia (NVDA) faced resistance at the 50-day moving average, falling over 1% on Monday. The stock had previously reached an all-time high of 152.89 following a breakout at 140.76 in October, but has since struggled with its recent lows. Nvidia has not issued a new sell signal, despite dropping more than 7% from its buy point and forming a double-bottom base with a buy point of 146.54. Investors should monitor the 126.86 level, as a drop below it could delay buying opportunities. Shares have been pressured as news circulated about the upcoming next-generation Rubin chip at the CES tech conference on January 5. This followed a mixed news cycle regarding Nvidia's competition, including a Chinese AI startup, DeepSeek, successfully training its AI model using Nvidia's chips, matching capabilities of U.S. rivals such as Microsoft-backed OpenAI and Anthropic. Nvidia has maintained a remarkable 177% gain this year after a dramatic 239% increase in 2023. However, funds have shown caution in buying the stock. While Nvidia's price performance has outstripped that of 94% of other stocks in Investor's Business Daily's database, its Accumulation/Distribution Rating stands at D-. The relative strength line, which gauges the stock's performance versus the S&P 500 index, sharply declined after Nvidia peaked at 152.89 on November 21. Analysts recommend waiting for improvements in this metric before making investment decisions. Why BATMMAAN stocks are investors' favorites: Tesla, Apple, Nvidia and more Despite these pressures, shares climbed nearly 4% on December 20 after Morgan Stanley analyst Joseph Moore designated Nvidia as a "top 2025 pick," although he adjusted his price target to 166 from 168. Moore detailed that delays in the older Hopper chip could allow more high-end memory chips for the upcoming Blackwell line to become available Nvidia's GPUs remain pivotal for AI tasks, with analysts noting that while custom ASICs are gaining market share, GPUs are still dominant for training applications. Mizuho analyst Jordan Klein indicated that "custom silicon will quickly gain share each year from GPUs, GPUs will be dominant for training purposes." Retail investors have heavily favored Nvidia in 2024, investing nearly $30 billion as of December 17, according to Vanda Research. The stock not only replaced Intel in the Dow Jones Industrial Average in November but also currently holds a market cap of $3 trillion, making it the second most valuable company after Apple. Despite these successes, Nvidia faced setbacks following Broadcom's results, which pointed to strong demand for its AI processors, suggesting increased competition in the AI market. Shares dipped further after Microsoft reported that it is not "chip supply constrained," indicating a potential risk to Nvidia's revenue, as one client represented 13% of its fiscal first-quarter revenue, believed to be Microsoft. After Fed Chair Jerome Powell hinted at fewer rate cuts for 2025, Nvidia stock rose, supported by its strong profit margins. Citi analyst Atif Malik highlighted Nvidia's capability to handle various workloads through its CUDA software as a substantial advantage over ASICs. Nvidia reported third-quarter sales of $35.08 billion, with earnings of 81 cents per share, exceeding expectations. This performance came during a broader market noting signs of demand fluctuations, though ASML, a key chip lithography partner, insisted on maintaining strong long-term sales targets. Analysts have mixed sentiments regarding Nvidia's ability to maintain its growth trajectory amid rising competition. While some see long-term prospects as strong, others express caution after what they perceive as artificial inflation of demand due to double ordering practices within the semiconductor sector. Experts like Doug Kass have indicated potential volatility in Nvidia's share price, with projections suggesting a possible significant decline in the near term due to perceived overstated earnings caused by customer ordering strategies. Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Should You Forget Nvidia and Buy This Tech Stock Instead? | The Motley Fool

Nvidia's annual sales stopped at $27.0 billion in fiscal year 2023 (which ended on Jan. 29, 2023 -- equivalent to fiscal year 2022 for most companies). Less than two years later, the company generated more than twice that much in https://www.fool.com/terms/f/free-cash-flow/. Revenues over the trailing-12-month period have skyrocketed to $113.3 billion. This is a golden age for Nvidia and its investors. Nvidia is one of the world's most valuable companies, and for good reason: It also ranks near the top in terms of profitability. As the hardware provider behind OpenAI's game-changing ChatGPT platform, Nvidia's order book is bulging as every technology expert under the sun wants to build their own AI solutions. The stock may be a bit expensive at 54 times adjusted earnings and 30 times sales, but those metrics peaked at 247 times and 46 times in the summer of 2023. If you bought Nvidia shares at the very top of that valuation crunch, you'd have a 139% gain by Dec. 26, 2024. If anything, Nvidia shares look more affordable nowadays, arguably setting investors up for great returns in the long run. If you like Nvidia's financial results, you'll love Alphabet's. The Google parent saw $340 billion in top-line revenues over the last four quarters, converting 55.8 billion into free cash flows. Sure, Nvidia just peeked above Alphabet's cash flow line, but that's at the tail end of a two-year downturn in the online advertising market. Alphabet invested $49 billion in data center upgrades and other infrastructure moves over the last year. Nvidia, at its best, is barely outperforming Alphabet at its worst. Many investors have focused on the ad-market downturn recently. As a result, Alphabet's Class A shares trade at just 26 times earnings and 7.1 times sales today. I could go on for ages and pages, listing the many reasons to buy Alphabet stock in 2024. Long story short, the company was designed for longevity in a rapidly changing economy, is deeply involved in the AI boom from the software and services angle, and comes with a very affordable stock anyway. What's not to love about Alphabet? Nvidia's business is soaring, but its surging growth is already priced into the stock. It could continue to rise in 2025 and beyond, but its valuation ratios should compress over time. Also, the company's dominant market position might fade out as a plethora of rivals bring out competing AI accelerator chips. You shouldn't sell all your Nvidia stock today, but it's only a "hold" recommendation for me. Alphabet is the best of both worlds: a great business paired with an affordable stock. At the same time, the digital ad market is swinging back from that inflation-inspired downturn, and the Google segment's revenues should soar in the next couple of years. And the market makers have apparently not accounted for this incoming growth spurt in their valuation models for Alphabet. So, Nvidia is a reasonable stock to hold in the long run, but I'm not in a rush to buy more of it. Alphabet, on the other hand, is one of my favorite stocks to buy and hold forever. If your diversified portfolio doesn't have exposure to this incredible stock yet, it's high time to hit Alphabet's "buy" button.