Nvidia's AI Dominance: Balancing Growth Potential and Market Challenges

Think It's Too Late to Buy Nvidia Stock? Here's the Biggest Reason Why There's Still Time. | The Motley Fool

Nvidia (NVDA -1.15%) is the most important hardware company in the artificial intelligence (AI) revolution today. Its high-end graphics processing units (GPUs) provide performance advantages that no other player in the space comes close to matching. Thanks to incredible demand for its processors, Nvidia stock has been posting absolutely stellar performance. As of this writing, the company's stock price is up roughly 141% over the last year of trading. With a market capitalization of roughly $3.3 trillion, the chipmaker stands as the world's second-largest company -- trailing only Apple. Nvidia is now valued at roughly 45 times this year's expected earnings and 25 times expected sales. But while the company trades at growth-dependent multiples and has historically been subject to cyclical pressures, there are several indicators that suggest the stock still has the potential to deliver big long-term upside. Given that it's the dominant player in the market for AI GPUs, it's not surprising that the narrative surrounding Nvidia centers on its hardware business. While demand indicators look strong for this year as AI infrastructure spending continues to ramp up, the chip specialist's business has historically been shaped by cyclical trends. That makes valuing it based on its recent performance and short-term results somewhat problematic. It also partially explains why the stock isn't trading even higher. But while GPU sales will remain the most important part of Nvidia's business for the foreseeable future, the market continues to underestimate the company's strengths in AI software. For starters, the widespread popularity of the company's CUDA platform is essentially locking the leading AI software players into its ecosystem. But Nvidia is actually in the early stages of becoming a more software-focused company. In addition to ramping up its artificial-intelligence-as-a-service (AIaaS) processing offerings, it's rolling out industry-specific AI tools and agentic AI services. These new software offerings set the stage for Nvidia's business to become less cyclical, and it could power massive long-term growth.

Is Nvidia Stock a Buy Now? | The Motley Fool

Nvidia (NVDA 3.40%) is one of the most widely followed stocks today, and it's easy to see why. Its lead in the artificial intelligence (AI) accelerator market supercharged its revenue growth and made it the largest semiconductor stock, as measured by market cap, next to Apple. Unfortunately for investors who want to buy Nvidia shares, its success has made determining whether it is a buy now a more difficult problem. Do its technical lead and continuous improvement make it a no-brainer buy, or has its valuation made it too expensive to touch at current levels? As most tech investors know, the company's AI accelerators and the revenue gains caused most of the growth in the stock price. With that, the data center segment that designs AI chips went from the company's second-largest revenue source to producing 88% of company revenue in just three years. This is fortuitous when considering the state of the growing AI chip industry. Grand View Research forecasts a compound annual growth rate of 29% through 2030. Between the predicted growth and shortages in accelerators, Nvidia is also the company best positioned to serve this market. The innovation does not stop with accelerators or the CUDA software platform that cements its AI chip dominance. Nvidia has continued to develop numerous new products, some of which it just announced at CES. This includes a graphics card built on Blackwell architecture and other AI-driven advancements designed to power humanoid robots and self-driving cars. Even though time will tell how these products perform in the marketplace, this innovation increases the likelihood that Nvidia will play an even more essential role in the tech industry in the foreseeable future. To that end, Nvidia generated $35 billion in revenue in the third quarter of fiscal 2024 (ended Oct. 27, 2024), a yearly increase of 94%. Amid that improvement, it earned $19 billion in net income in fiscal Q3, a 109% rise from year-ago levels. Indeed, investors should be thrilled to experience such growth, and experienced investors know that the triple-digit revenue increases of past quarters are not sustainable. Unfortunately, investors tend to punish stocks for slowing revenue growth, and the company's valuation may leave it vulnerable, at least if digging beyond the surface. On the surface, its price-to-earnings ratio of 53 is above S&P 500 averages, though many slower-growing tech stocks have a higher earnings multiple. The price-to-sales (P/S) ratio of 30 better highlights how expensive the stock has become, but that may not deter investors who want to benefit from Nvidia's rapid growth. Nonetheless, the price-to-book value ratio of 51 takes its valuation into nosebleed territory. In comparison, AMD trades at just over 3 times book value. Additionally, Nvidia's success makes it more subject to the cyclicality that has always defined the semiconductor industry. Indeed, the stock prices may hold, and it is possible that Nvidia stock will avoid a significant downturn in the near term. Still, its situation points to a key vulnerability. New AI accelerators sell for more than $30,000. However, if demand falls, prices will likely follow, a factor that could reduce or even reverse the company's revenue growth. Nvidia stock has also experienced pullbacks of more than 50% twice in the last seven years. Such a reversal could bring about another significant decline. Thankfully, cycles also move upward at some point, so Nvidia stock should eventually recover from any downturn due to its new technology. Still, considering that a down cycle will inevitably occur at some point, investors may want to think twice about making huge purchases at this time. Under current conditions, investors should treat Nvidia as a hold. Considering its valuation metrics and the chip industry's cyclicality, investors are likely overpaying for Nvidia at its current price. Nonetheless, the company benefits from clear dominance in the AI chip industry, and that is unlikely to change soon. Moreover, its continued innovation will likely cement that dominance and foster more long-term growth. Hence, when balancing Nvidia's attributes with its challenges, staying the course is probably the best action for its shareholders.

1 Big Reason Nvidia Stock Could Be About to Make a Big Move | The Motley Fool

Though Nvidia (NVDA 3.40%) has been a top performer in the stock market in the past couple of years, shares of the semiconductor giant have lost momentum since the release of its fiscal 2025 third-quarter results in November last year. Investors were not impressed by Nvidia's quarterly performance and outlook even though it handily beat Wall Street's expectations thanks to the booming demand for its artificial intelligence (AI) chips. A relative slowdown in the company's stunning pace of growth coupled with margin concerns have weighed on the stock. As a result, shares dipped nearly 9% since the company released its latest set of results on Nov. 20, 2024. However, a recent piece of news from one of Nvidia's key partners could help this chipmaker regain its momentum and give the stock a nice shot in the arm. Nvidia is a fabless chipmaker that only designs its chips. It doesn't have any manufacturing facilities of its own, so it outsources the fabrication of its chip designs to Taiwan Semiconductor Manufacturing (TSM 2.66%). Popularly known as TSMC, this Taiwan-based company is the largest semiconductor foundry in the world with a market share of 64%, according to Counterpoint Research. Nvidia was reportedly the second-largest customer of TSMC in 2023, accounting for 11% of the manufacturer's top line. That share is likely to have moved higher as TSMC has been rapidly enhancing its capacity to help Nvidia fulfill more orders. So, the news that TSMC's monthly sales increased an impressive 58% year over year in December 2024 bodes well for Nvidia since it represented a big jump versus the year-over-year increase of 34% seen in November 2024. TSMC's solid end to the year lends credence to management's comments on the November 2024 earnings conference call that Nvidia is on track to generate significantly higher revenue from sales of its newly launched Blackwell graphics processing units (GPUs). The company has been working to increase the output of its Blackwell GPUs with TSMC's help, which is why Nvidia warned that its margins would take a hit in the near term as it aggressively ramps up output. According to chief financial officer Colette Kress: Our current focus is on ramping to strong demand, increasing system availability, and providing the optimal mix of configurations to our customer. As Blackwell ramps, we expect gross margins to moderate to the low 70s. When fully ramp, we expect Blackwell margins to be in the mid-70s. TSMC's revenue in December 2023 was down 8% year over year, so the sharp increase in December 2024 revenue makes it clear that it is indeed manufacturing more chips for Nvidia this time around. That's not surprising considering that TSMC doubled its advanced chip-packaging capacity in 2024 to help meet AI-fueled demand, a trend that's expected to continue in 2025. This is precisely the reason Nvidia is likely to deliver stronger-than-expected growth in the coming quarters. In October 2024, there were reports suggesting that Nvidia sold its entire capacity of Blackwell processors for the next 12 months due to unprecedented demand. CEO Jensen Huang added to the Blackwell craze by pointing out that the chip is witnessing "insane" demand. That's why it makes sense for Nvidia to go all out to manufacture as many Blackwell processors as possible so that it can reduce waiting times for its chips. TSMC is helping the chipmaker in this regard by significantly increasing its capacity. That's the reason there is a strong likelihood of Nvidia being able to fulfill more orders than expected, leading to better-than-expected revenue growth in the coming quarters. Analysts have increased their revenue estimates for the next fiscal year (which will start from the end of this month), as seen in the following chart, and TSMC's revenue growth last month suggests that those estimates may move higher. At the same time, some analysts are forecasting Nvidia to generate $200 billion in revenue from sales of data center chips in fiscal 2026. That's higher than the overall revenue that the company is expected to deliver in the upcoming fiscal year. The aggressive ramp-up of Blackwell chips, as evidenced by TSMC's December quarterly sales, could very well help Nvidia beat Wall Street's expectations, and that could pave the way for more upside in this AI stock. And given that Nvidia stock is trading at 31 times forward earnings, which is slightly lower than the tech-laden Nasdaq-100 index's earnings multiple of 32.5, investors can consider buying it before it embarks on its next bull run.

Nvidia Shares Fall on New AI Chip Export Rules. Is This a Golden Opportunity to Buy the Stock? | The Motley Fool

Nvidia (NVDA 3.40%) shares came under pressure recently after the Biden administration imposed tougher guidelines regarding the export of artificial intelligence (AI) chips. Under the new rules, most countries would be capped on the amount of advanced AI chips, such as Nvidia's graphic processing units (GPUs), they can purchase. Based on this Interim Final Rule on Artificial Intelligence Diffusion, 18 countries face no restrictions and will not be required to get a license to buy GPUs, but 24 countries are banned outright. Most countries will need to get a license to import more than 1,700 GPUs. They could then purchase up to 50,000 GPUs, or up to 100,000 if certain requirements are met. Some nations, meanwhile, will be allowed to purchase up to 320,000 GPUs over a two-year period. Nvidia blasted the rule, saying it was done in secret under the guise of an "anti-China" measure, and the company argued it would only weaken U.S. global competitiveness, threaten innovation, and harm economic growth. At the same time, the company appealed to the incoming Trump administration, saying the first Trump administration helped lay the foundation that led to the strength the U.S. sees in AI today. Right now, there is a 120-day commentary period before the rule goes into effect, and the incoming Trump administration could make changes. However, even some Republicans are in favor of tighter restrictions on advanced chips. The 18 countries with no restrictions are some of the largest in the world, and Nvidia's sales into those European and Asian countries would not be impacted. However, there are data centers spread around the globe, and there are places in the Middle East that are emerging as AI data center hubs. Meanwhile, a company in India recently completed its first AI data center with 60,000 GPUs. Limiting entire countries to 50,000 or even 100,000 GPUs would certainly hurt AI data center development in those regions. Large language models (LLMs) from Meta Platforms and Elon Musk's xAI are already being trained on more GPUs than these export limits, with Llama 4 using 160,000 GPUs. And there is talk of companies using GPU clusters made up of 1 million AI chips in the near future to train the next generation of AI models. When looking at a breakdown of Nvidia's revenue so far in 2024, 45% came from the U.S. and 17% from Taiwan, which is not on the export control list. Nearly 13% of its revenue has come from China, where it was already prohibited from selling its most advanced chips. The rest comes from other countries, some of which the rule likely affects. That said, much of Nvidia's business comes from large hyperscaler customers (companies that own huge data center complexes), and that is where much of its growth will come from in the future. These companies, including big cloud computing companies like Amazon, Microsoft, and Alphabet, will be able to seek approval to bypass the licenses for establishing AI data centers in impacted countries. Nvidia's top three customers accounted for about 34% of its revenue through the first nine months of fiscal 2025. Given the current demand for GPUs, a lot of the impact from a stricter export policy is likely to be absorbed elsewhere in the near term. The big hyperscalers were always going to be the biggest source of growth and demand for Nvidia's chips, and that is now more likely than ever. Countries that need more than the allotted amount of chips could look to partner with the big cloud computing companies. Microsoft has already partnered with the United Arab Emirates, and in response to the announcement, Microsoft said it can continue to meet the technology needs of countries and customers around the globe. As such, it sounds like many countries will be able to get the amount of chips they need as long as they have a U.S. tech gatekeeper. That will allow countries to move forward with their AI plans while making sure chips don't get directed toward places like China or Russia. From a valuation perspective, the stock currently trades at a forward price-to-earnings (P/E) ratio of just below 30 based on analysts' fiscal 2026 estimates. Its price/earnings-to-growth ratio (PEG) is below 1, which typically indicates a stock is undervalued, although growth stocks often carry PEGs much higher. While the new export curbs add some additional potential risk for the company, Nvidia's valuation and overall opportunity remain attractive enough to make the stock a solid buy for investors.

Think Nvidia Stock Is Expensive? This Chart Might Change Your Mind. | The Motley Fool

Nvidia (NVDA -3.00%) was one of the best-performing stocks of 2024. It even dwarfed the returns of the Nasdaq Composite index in a year the index itself returned an amazing 28.6%. Its stock price soared as the market became enthused by consistent triple-digit revenue gains that led to triple-digit net income gains. That led to a 171% increase in Nvidia's stock price in 2024. It also pushed the stock's price-to-sales ratio to 30. Those who might think that means the stock is now too expensive should look at the opportunity still ahead. Enough opportunity can trump a high P/S. One chart might help explain. Big tech companies continue to ramp up spending to build artificial intelligence (AI) infrastructure. Microsoft and Amazon each recently announced commitments to invest $80 billion and $11 billion, respectively, in the coming months. The investments are for data centers to train AI models, and distribute AI and cloud-based applications. That's because the market for generative AI is expected to grow tenfold over the remainder of the decade. Generative AI has a wide array of applications. It is already being used to generate content and enhance creativity. Businesses use it to enhance customer experiences by adapting content and services to individual preferences. It can enhance existing data, improve cost efficiency, foster innovation, and aid in simulations and planning. Investors themselves are using generative AI for multiple reasons. Nvidia will be a major beneficiary of the investments to build out the needed infrastructure. Its Blackwell architecture is already in high demand, and the company will have its new Rubin platform available next year to succeed Blackwell. CEO Jensen Huang also introduced a new desktop supercomputer at the recent CES conference in Las Vegas. The $3,000 unit can be used by researchers, data scientists, and even students. It shows that Nvidia is broadening the market for its advanced chips beyond just hyperscaler data centers. With a quickly growing market for generative AI and innovative products, Nvidia has enough business opportunity ahead to justify the elevated valuation.

Why Nvidia Stock Skyrocketed 171.2% in 2024 but Is Losing Ground in 2025 | The Motley Fool

Nvidia continued to see very strong demand for its graphics processing units (GPUs) for artificial intelligence (AI) last year. The company delivered four quarters of sales and earnings beats, and its valuation also soared in conjunction with bullish coverage from analysts, new growth initiatives, and the company's stock split. Nvidia continued to command a dominating position in AI processors last year. With tech companies increasing their spending on AI infrastructure, Nvidia delivered another year of strong sales and earnings reports. The company managed to beat the average Wall Street sales and earnings targets with each of the four quarterly reports it published in calendar 2024. The table below breaks down the company's top-line performances compared to the average analyst estimates. Data sources: Nvidia and CNBC. With the business continuing to post very strong margins, sales beats meant that the company's quarterly reports also arrived with earnings results that came in well ahead of Wall Street's targets. In addition to fundamental performance catalysts, Nvidia stock also got a lift from a stock split last year. The company announced a 10-for-1 stock split on May 22 and immediately saw an uptick in bullish momentum. The company's split was carried out on June 10. While its stock didn't immediately see big gains following the completion of the move, it did see subsequent valuation increases that may have been aided by the split. Nvidia stock actually saw gains early in 2025 thanks to news from Microsoft about its plans for AI infrastructure spending this year. On Jan. 3, Microsoft published a blog post stating that the company planned to spend roughly $80 billion this year to build out its AI data center capabilities. Nvidia's GPUs are the foundational hardware element powering today's most advanced AI training systems and applications, and it likely stands to be the largest beneficiary of Microsoft's big spending push. But Nvidia stock has subsequently seen pullbacks in conjunction with macroeconomic pressures and geopolitical risk factors. As of this writing, the company's share price is down roughly 1.5% across 2025's trading. On Jan. 10, the Bureau of Labor Statistics published U.S. jobs numbers for December. The report showed that the U.S. economy added 256,000 jobs last month, which came in far ahead of the average forecast for additions of 155,000 jobs in the period. The higher-than-expected jobs growth raised concerns that inflation could be trending higher than investors and economists anticipated. If so, that makes it less likely that the Federal Reserve will cut interest rates and create a more favorable backdrop for growth stocks. Nvidia stock is facing another bearish pressure following news that the U.S. will expand its restrictions on the export of advanced AI chips to China and other rival nations. Export bans were already in place that prevented Nvidia's most advanced processors from being sold to China, but it looks like the severity and breadth of limitations is poised to increase significantly in the near term.

Is It Too Late to Buy Artificial Intelligence (AI) Leader Nvidia in 2025? There's a Growing Mountain of Evidence Piling Up That Provides a Crystal Clear Answer. | The Motley Fool

Demand for artificial intelligence (AI) has driven Nvidia to new heights, but will the trend continue? There's been a lot of ink spilled about the growing demand for artificial intelligence (AI) and the potential for the technology to revolutionize the world. Nvidia (NVDA -3.00%) has been one of the clearest beneficiaries of this trend. The company's graphics processing units (GPUs) cornered the market by providing the computational horsepower needed to fuel the technology. Yet, Nvidia's stock price has stalled over the past six months. Some investors fear the gravy train has run its course and demand for its AI chips could trail off. However, a growing mountain of evidence provides a crystal clear answer to the question: Is it too late to buy Nvidia stock? The biggest contributor to Nvidia's meteoric rise over the past two years has been the unrivaled performance of its GPUs. These chips were originally developed to create lifelike images in video games but are equally adept at providing the computational horsepower needed to support generative AI. The sheer volume of data required to train these AI models is daunting, and few companies have the resources to develop these top-tier models from scratch -- and nearly all of them are Nvidia customers. The final totals for 2024 have yet to be released, but Nvidia dominates the market for the data center GPUs used for AI. In 2023, much like 2022, Nvidia commanded a 98% market share, and its leadership position in the space isn't expected to change any time soon. Even as the company has tasked its partners to ramp up production of its high-end AI processors, demand continues to exceed supply. There's evidence suggesting that unprecedented demand will continue. Just last week, Microsoft president Brad Smith announced that in fiscal 2025 (which began July 1), the company "is on track to invest approximately $80 billion to build out AI-enabled data centers to train AI models and deploy AI and cloud-based applications." He was clear about why he believed this spending was necessary. "Not since the invention of electricity has the United States had the opportunity it has today to harness new technology. ... In many ways, artificial intelligence is the electricity of our age, and the next four years can build a foundation for America's economic success for the next quarter century." For context, Microsoft spent nearly $56 billion on capital expenditures (capex) last fiscal year, marking a 44% increase in spending. This shows that investment to support AI is ramping up rather than slowing down. Microsoft isn't the only tech powerhouse spending heavily on AI. Alphabet is expected to spend about $51 billion on capex when its books are closed in 2024, and the company plans to ramp up spending next year. On the Q3 earnings call, CEO Sundar Pichai said, "Realizing [the opportunity] of AI requires ... meaningful capital investment," and said there will be "substantial increases in capital investment ... going into 2025." Not to be left out, Amazon is expected to spend $75 billion on capex in 2024 and even more in 2025, according to CEO Andy Jassy. He went on to say the majority of that will be to support its cloud unit, Amazon Web Services (AWS), and the spending "here is really driven by generative AI." While it isn't a cloud provider, Meta Platforms has been spending heavily to develop its cutting-edge Llama AI models. The company was on track to spend roughly $39 billion in 2024, and CFO Susan Li said, "We continue to expect significant capital expenditures growth in 2025." She previously stated that this spending was "to support our AI research and product development efforts." Based on these tech executives' comments, it's clear that spending on AI is ramping up. The lion's share of that spending will be for the data centers and servers needed to support AI, with the principal beneficiary being Nvidia, whose chips underpin the technology. Nvidia doesn't disclose exactly who its biggest customers are, but Wall Street has done some detective work. Analysts with Bloomberg and Barclays Research have concluded that Nvidia's four biggest customers -- responsible for 40% of revenue -- are: Executives from each of these companies have been crystal clear about their plans to ramp capex spending, the vast majority to support cloud computing and, more specifically, AI. As the unrivaled leader in the data center GPU space, Nvidia stands to reap the windfall of all this spending. After generating triple-digit year-over-year growth for five consecutive quarters, Nvidia's growth eventually slowed but remains impressive nonetheless. During its fiscal 2025 third quarter (ended Oct. 27), Nvidia generated record revenue of $35 billion, which surged 94% year over year and 17% sequentially. At the same time, adjusted earnings per share (EPS) of $0.81 soared 103%. The days of triple-digit growth have likely passed, but many believe Nvidia still has a long runway ahead. Despite the runaway success of the company's Hopper AI processor, the recently released Blackwell chip is expected to generate even more sales. The processor, which is in full production and began shipping late last quarter, is believed to be sold out for the coming 12 months -- despite its recent release. The mountain of evidence suggests Nvidia has a long road ahead as the adoption of AI gains steam. Furthermore, even after notching gains of more than 850% over the past two years (as of this writing), Nvidia stock remains attractively priced, selling for roughly 32 times next year's expected sales. Given its industry-leading technology, the increasing demand for its processors, and the reasonable valuation, I would submit that it isn't too late to buy Nvidia, particularly given the growing adoption of AI.

1 Wall Street Analyst Thinks Nvidia Stock Is Going to $175. Is It a Buy Around $140? | The Motley Fool

Nvidia (NVDA -3.00%) dominated much of the conversation among investors in 2024 as the stock marched 171% higher for the year. That was for good reason, as revenue and earnings exploded, with many big tech companies scrambling to acquire Nvidia's advanced chips for artificial intelligence (AI) data centers. CEO Jensen Huang just gave the keynote speech at the CES conference in Las Vegas, providing updates on Nvidia's latest advanced semiconductor chips and other products. That news led one Wall Street analyst to recommend that Nvidia stock should be bought. Oppenheimer analyst Rick Schafer sees another 25% upside from recent levels, with a price target of $175 per share. Huang's CES presentation wasn't what some analysts expected. Many expected him to provide more details on sales of the latest Blackwell GPU (graphics processing unit) architecture, or insights into the next-generation Rubin platform. But Huang instead looked even beyond that. In the nine months ended Oct. 27, 2024, Nvidia derived more than 87% of revenue from its data center segment. That's not surprising as large hyperscaler companies race to build data centers filled with Nvidia's advanced chips. But the Oppenheimer analyst pointed out other areas that Nvidia's CEO discussed as growth drivers moving forward. In his note, Schafer wrote: "Robotics and automotive are growing AI market opportunities. Management highlighted the need for three computing systems in robotics/auto," according to reports. Nvidia also revealed a new generation of gaming GPUs. Schafer pointed to Nvidia's focus on offerings for industry-specific options, including NVIDIA NIM for manufacturing. Other enterprise solutions are large language models (LLMs) dubbed Nemotron and NeMo. These are cloud-based frameworks to create synthetic data for training other LLMs or building AI agents for autonomous vehicles, robotics, and other applications. It's clear that Nvidia's solutions just start with its GPU hardware. Huang even introduced a new desktop supercomputer currently called Project DIGITS. It's due out in May and aimed at academics and researchers who don't have the immense data center compute power at their disposal. All these opportunities make Nvidia a buy at recent prices.

Nvidia Stock Investors Just Got Great News From CEO Jensen Huang | The Motley Fool

Jensen Huang founded accelerated computing company Nvidia (NVDA -0.02%) in 1993, and has served as the CEO and president ever since. Nvidia has achieved many breakthroughs under his leadership, but the invention of the graphics processing unit (GPU) in 1999 was particularly momentous. Nvidia GPUs have long been the gold standard in rendering graphics for 3D design and gaming applications. More recently, they have become the chips of choice for complex data center workloads like training large language models and running generative artificial intelligence applications. Jensen Huang last week gave a keynote speech at CES 2025, an annual conference held in Las Vegas. CES focuses on innovations within the technology sector, and Huang's speech made it clear that Nvidia's product pipeline is still bursting with potential. Wall Street's interest in generative artificial intelligence can be traced back to the launch of ChatGPT in late 2022. The conversational application went viral almost immediately, setting in motion a series of events that caused a tremendous increase in demand for Nvidia GPUs. The company has reported triple-digit earnings growth in the last six quarters, and its share price has increased 840% in the last two years. Some investors worry generative AI is a short-term catalyst or even a bubble, but nothing could be further from the truth. The internet has only become more essential since it was created, and artificial intelligence will be no different. In other words, the generative AI boom is just the first phase of a technological revolution that will continue indefinitely. And Nvidia sits at the heart of that revolution. Jensen Huang at CES said, "The next frontier of AI is physical AI." Whereas generative AI can understand and generate media, physical AI can understand, navigate, and interact with the physical world. It will eventually power numerous types of autonomous robots, but the first type of intelligent robot most people engage will be an autonomous car, according to Huang. Importantly, Nvidia has products that address all three layers of the autonomous vehicle computing stack: Its GPUs provide the supercomputing infrastructure needed to train AI models. Its Drive platform provides the software development tools required to build self-driving applications. And its AGX systems provide the in-vehicle computing power that lets cars navigate the physical world. Jensen Huang in a recent interview with Yahoo Finance said Nvidia's autonomous driving products may reach a revenue run rate of $5 billion this year, up from $1.8 billion in the last quarter. Importantly, automotive and robotics is currently the company's smallest segment, but that could change quickly. Citigroup estimates the number of autonomous vehicles will increase almost 5-fold by 2030 and 14-fold by 2035. Jensen Huang at CES told the audience, "The ChatGPT moment for robotics is coming." He then introduced Cosmos, a suite of pretrained robotics models that can be fine-tuned by developers. Huang also explained that Nvidia has products that address all three layers of the robotics computing stack. First, Nvidia GPUs provided the supercomputing infrastructure needed to train robotics models. Second, the Isaac platform includes code libraries and pretrained models that help engineers develop robotics applications across three use cases: industrial manipulation arms, autonomous mobile robots, and autonomous humanoid robots. Isaac also works as a simulation engine that supports synthetic data generation and the evaluation of robotics models. Finally, Jetson embedded systems bring together GPUs, CPUs, and memory on a single chip, which provides the computing power robots require to interact with the real world. Nvidia is clearly well positioned to benefit as the AI boom evolves into a robotics revolution, and humanoid robots could be a massive opportunity for the company. Citigroup estimates spending will top $200 billion by 2035 and $1 trillion by 2040. Many investors assume Nvidia is a very expensive stock because it returned 840% in the last two years. But shares trade at 55 times earnings, a reasonable valuation given that Wall Street anticipates earnings growth of 38% annually in the next three years. Those figures give a price-to-earnings-to-growth (PEG) ratio of 1.4. Comparatively, the stock traded at 63 times earnings two years ago, and Wall Street at the time anticipated earnings growth of 22% annually. Those figures give a significantly higher PEG ratio of 2.9. So, Nvidia stock is actually much cheaper today than was before the generative AI boom started. And given the tailwinds in autonomous driving and robotics that Jensen Huang highlighted at CES, the stock is still a worthwhile long-term investment.

Will Nvidia Stock Fall Below $100 in 2025? Here's What History Has to Say. | The Motley Fool

A number of catalysts powered year two of Wall Street's bull market rally, such as Donald Trump's November victory (stocks soared during his first term in the White House) and excitement surrounding stock splits. But at the top of the list is the euphoria associated with the rise of artificial intelligence (AI). Empowering software and systems with AI so they can become more proficient at their tasks and potentially learn new skills gives this technology a stratospheric ceiling. In Sizing the Prize, the analysts at PwC forecast a $15.7 trillion boost to global gross domestic product from AI by 2030. No company has been a more direct beneficiary of the AI revolution than semiconductor giant Nvidia (NVDA -1.10%). Since 2023 began, Nvidia stock has added roughly $3 trillion in market value, with shares up a cool 830%, as of Jan. 10. But is this breakneck climb for Nvidia too good to be true? Let's allow history to be the ultimate judge of whether or not Nvidia stock can fall below $100 per share in 2025. Before digging into the details of what's to come, it's important to understand the dynamics of how we got here. Nvidia's ascension to briefly becoming America's largest publicly traded company is all about its leading role as the "brains" of high-compute data centers. Based on a study conducted by semiconductor analysis firm TechInsights, data-center graphics processing unit (GPU) shipments in 2022 and 2023 respectively totaled 2.67 million units and 3.85 million units. Nvidia's GPUs were responsible for all but 30,000 GPUs shipped in 2022 and 90,000 GPUs shipped in 2023. Businesses simply can't get enough of its Hopper (H100) chip and next-generation Blackwell GPU architecture. Insatiable demand for the company's hardware has led to tangible benefits. With demand swamping supply, Nvidia has been charging between $30,000 and $40,000 for its ultra-popular Hopper GPU. For context, this is well above the $10,000 to $15,000 price point Advanced Micro Devices (AMD -1.05%) was netting for its Instinct MI300X GPU. A higher price point translates to a notable uptick in Nvidia's gross margin. Furthermore, the company's CUDA software platform has played a key role in keeping customers loyal to its ecosystem of products and services. CUDA is the toolkit developers rely on to maximize the computing potential of their Nvidia GPUs and to build large language models. Lastly, Nvidia has benefited from being the preferred AI-GPU supplier of America's most-influential businesses. It's top customers by net sales include many members of the "Magnificent Seven," such as Microsoft, Meta Platforms, Amazon, and Alphabet. Now that you have a better idea of where Nvidia has been and how we got to this point where it's trading at nearly $136 per share, let's lean on history as a guide. Regardless of how promising the next game-changing technology, innovation, or trend has been over the last couple of decades, there has always been competition waiting in the wings for its chance at a piece of the proverbial pie. For the time being, Nvidia is the undisputed provider of GPUs in AI-accelerated data centers. However, its monopoly like market share is virtually certain to ebb as new competition enters the arena. AMD, for example, is ramping up output of the MI300X and newly introduced MI325X, which are notably cheaper than Nvidia's chips and likely more accessible. Businesses that aren't interested in waiting for Nvidia's backlog to clear may consider less-costly alternatives like AMD. Additionally, Nvidia's top customers by net sales are all developing AI chips to use in their data centers. Although the chips Microsoft, Meta, Amazon, and Alphabet are internally developing won't match the computing speed of Nvidia's Hopper and Blackwell GPUs, they'll be cheaper and more readily available. In other words, it begins minimizing the AI-GPU scarcity that's fueled the lion's share of Nvidia's pricing power and gross margin improvement. On top of history telling us that competition is inevitable, a worrisome precedent has been set by market leaders of next-big-thing investment trends over the last three decades. In the mid-1990s, the proliferation of the internet began offering new ways for businesses to connect with customers. However, it would be many years before most companies realized how best to monetize their online storefronts. Although the internet positively changed the growth trajectory for corporate America, this didn't occur until after the dot-com bubble burst. Bubble-bursting events and next-big-thing investment trends have gone hand-in-hand, without exception, for decades. Though not a comprehensive list, we've witnessed bubbles burst for genome decoding, business-to-business e-commerce, nanotechnology, 3D printing, blockchain technology, and the metaverse. The trait all of these high-dollar addressable trends have in common is investors overestimating the adoption and early stage utility of a technology or innovation. Every game-changing technology/innovation needs time to mature, and it doesn't appear artificial intelligence has hit this point as of yet. Most businesses still lack a clear game plan of how they're going to generate a positive return on their AI investments. Based on what history tells us, market leaders of next-big-thing trends typically lose 80% or more of their value on a peak-to-trough basis when the bubble bursts. Thankfully for Nvidia, it has well-established operating segments -- e.g., GPUs used for gaming and cryptocurrency mining, as well as virtualization software -- that may be able to stunt its fall. Nevertheless, history is quite clear that parabolic early stage moves higher for market leaders of next-big-thing trends aren't sustainable, which makes a move below $100 in 2025 for Nvidia stock a very real possibility.

How Big Is This Threat for Nvidia in 2025? | The Motley Fool

The past two years have been big for Nvidia (NVDA -1.10%), thanks to its dominance in the artificial intelligence (AI) chip market. The stock roared higher, gaining more than 800% over the period -- and this movement drove Nvidia to a market value of more than $3.6 trillion to temporarily surpass Apple as the world's biggest company. This occurred as quarterly earnings rose in the double digits and triple digits to reach record levels. Nvidia accomplished this and more not only because of its AI chip strength, but also because of its expansion into a variety of related products and services. The company has built an AI empire, and certain elements, such as enterprise software, could lead to more growth ahead as the AI story develops. However, one thing may get in the way of Nvidia's star-studded path -- the government's new restrictions on the export of AI chips. The Biden Administration earlier had placed limits on exports to China and other countries based on U.S. security concerns. The new framework adds to the initial effort -- and Nvidia even struck back in a statement this week. How big is this threat for the AI powerhouse in 2025? Here's a bit of background on these restrictions. In 2022, the U.S. launched controls on the export of powerful AI chips to China, saying the country was using these items "to produce advanced military systems including weapons of mass destruction." At the time, the U.S. government set limits on the power of chips that could be exported to China -- and Nvidia designed chips specifically to meet the rules. This already represented a headwind for Nvidia, as sales to China represented 14% of data center revenue in the 2024 fiscal year, down from 19% in the previous year. "Our competitive position has been harmed, and our competitive position and future results may be further harmed in the long term, if there are further changes in the USG's [U.S. government's] export controls," the company wrote in its annual report. Now, the new framework broadens the number of countries impacted by rules and limitations. As with the earlier restrictions, the framework primarily targets China, but certain other countries -- not included among the 18 key allies and partners of the U.S. -- may face headwinds when trying to access the highest-performance chips. The measures could affect 120 countries, including Mexico, Portugal, and Israel, according to an Associated Press report. Nvidia struck back in a statement, calling the framework "misguided" and saying it "threatens to derail innovation and economic growth worldwide." How bad is this news for Nvidia? It's important to consider that this plan won't be enforceable for 120 days, offering President-elect Trump and his administration time to consider it. Trump has expressed concern about competition from China and promised tariffs on imports from the country, but it's too early to predict what he'll decide regarding the AI diffusion restrictions. Still, the arrival of any new administration offers potential for a turnaround on this issue or at least changes that could make the situation easier for Nvidia and other U.S. technology companies. It's also key to keep in mind that Nvidia and its peers are among the country's biggest companies powering the economy today. They, along with the Semiconductor Industry Association, are on the same team when it comes to the situation -- and are making their opinions heard on the issue. This may influence Trump and his team. It's likely that there will be at least some discussion of the matter and potential adjustments here and there to favor innovation and earnings growth. All this means that, yes, this isn't the greatest news for Nvidia and peers at the start of the new year. But I wouldn't expect it to heavily weigh on the stock in 2025 or beyond because it seems reasonable to expect discussion and compromise. Plus, Nvidia has shown its ability to be proactive. For example, it's designing chips for China to respect new restrictions. So there's reason to be confident about the company's ability to manage this next stage of the AI chip export story.

Jensen Huang Just Delivered Trillion-Dollar News to Nvidia Investors | The Motley Fool

Nvidia (NVDA -3.00%) has offered investors good news on many occasions in recent years. From reports of record revenue and high demand for its new products to an invitation last year to join the Dow Jones Industrial Average, the chipmaker has been on fire. This is because Nvidia has built an empire in today's hottest growth area: artificial intelligence (AI). The tech giant is the source of the world's most sought-after chips as well as a wide variety of related products and services -- and the world's biggest companies, from Amazon to Tesla, are spending massive sums on them. These companies use Nvidia's tools to power their AI programs or in the case of cloud infrastructure providers like Amazon Web Services (AWS), to offer their processing power to their customers. All of this helped lift Nvidia's stock price by 171% last year -- the best performance of any Dow component. But Nvidia's exciting news is far from over. CEO Jensen Huang recently delivered a trillion-dollar message to Nvidia investors that could signal more gains over the long term. Let's start by taking a quick look at Nvidia's story so far. The company sells the world's top graphic processing units (GPUs), chips capable of providing the rapid parallel-processing power required for tasks such as the training and inferencing of AI models. It has also built an entire ecosystem of AI products, including an enterprise software platform and tools that cater to specific industries such as automobiles or healthcare. All of this has helped Nvidia's revenue take off: It reached a record of more than $35 billion in the company's most recent fiscal quarter, Q3 2025. To offer some perspective, its top line for the entirety of its fiscal 2023 was just $27 billion. Now, let's consider the recent commentary from Huang. Speaking at CES this past week in Las Vegas, he offered many updates on Nvidia's platforms, announced new products, and even gave investors some insight into the potential of AI over time. He also spoke of specific industries and how they would use AI, which brings us to his trillion-dollar comment. In reference to the autonomous vehicle market, Huang said, "I predict that this will likely be the first multitrillion-dollar robotics industry." Noting that there are more than a billion vehicles on the road globally that drive more than a trillion total miles every year, and forecasting that in the future, many of these vehicles will be heavily autonomous, he concluded, "this is going to be a very, very large industry." In autonomous vehicles, Nvidia already has reached a $5 billion annual revenue run rate, and it's working with every major car company around the world. It also announced that its next-generation car computer, Thor, is in full production. Thor takes data from sensors, processes it, and turns it into driving information. This generation of Thor has 20 times the processing capacity of its predecessor, representing gains in speed and quality. Nvidia offers its customers three computers for the construction and use of autonomous vehicles: one to train AI models, another to test drive and produce synthetic data, and a third that serves as a supercomputer in the car. So, Nvidia could help automakers through every stage of autonomous vehicle development, and remain a key supplier of systems for the final products. This makes it a one-stop shop for any company aiming to add autonomous features to its vehicles or go all in on self-driving cars. At CES, Huang announced a big win: Nvidia just signed an agreement to help Toyota create its next-generation autonomous vehicle. So, what does all of this mean for investors? We often think of Nvidia as a designer of AI chips -- and it is. But the company has become so much more, offering entire platforms for high-growth industries such as autonomous vehicles. And this particular industry represents a massive long-term growth opportunity. All of this suggests that Nvidia's high-flying days are far from over. Even if the stock takes a pause at some point, over time, this AI player has what it takes to keep soaring.

Nvidia's $3 Trillion Rally Is On Edge, Wall Street is Unfazed

(Bloomberg) -- Nvidia Corp.'s $3 trillion run-up in market value in the two years since ChatGPT helped trigger an AI frenzy is bigger than any stock rally in history in such a short time span. But the landscape is now changing for the chipmaker. Competitors and customers are stepping up efforts to take a bigger slice of the artificial intelligence chip market. The sector's blistering revenue growth is slowing. The Biden White House is looking to limit the sale of Nvidia's most-advanced chips abroad, although it's unclear how President-elect Donald Trump's incoming administration will handle that. Sounds scary? None of these risks are deterring investors from betting that Nvidia's rally could add hundreds of billions of dollars more in market value in 2025 as the deluge of spending on AI computing keeps gaining steam. "I'm not concerned we've seen a peak in Nvidia," said Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management. "There's more growth to be had, although we should also see more volatility. The AI revolution is going to be a long road with a lot of potholes." That turbulence has been on display recently, with Nvidia shares slumping after a presentation by Chief Executive Officer Jensen Huang fell short of investors' high expectations. The stock has dropped for five-straight sessions, shedding 12% since hitting a record on Jan. 6. Investors say these kinds of swings come with the territory. "Nvidia's stock is always going to be way more volatile than the market," said Joanne Feeney, portfolio manager and partner at Advisors Capital Management, which raised its price target on the shares earlier this week. "We see it as having multiple years of well-above average growth in earnings, and we do see that as explaining and sustaining the valuation." Nvidia shares are projected to rise 32% over the coming year, according to the average of analyst price targets compiled by Bloomberg. That would give the chipmaker a market value of more than $4 trillion, potentially dwarfing its closest peers Apple Inc. and Microsoft Corp. Its revenue is expected to hit $129 billion in its current fiscal year, which ends Jan. 30, up from $27 billion two years ago. That said, there are plenty of potential hazards ahead. Here's a look at the biggest issues Nvidia faces in the coming year: AI Spending Nvidia's rally ultimately depends on demand for AI services. Nearly half its revenue comes from a handful of tech giants who are rushing to add computing capacity. Capital expenditures by Microsoft, Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. are projected to hit a combined $257 billion in the current fiscal year, up from $209 billion in 2024. Of course, those plans could change if the companies and their customers aren't generating the big sales they expected from AI. "At some point we're going to need to see new applications drive revenue acceleration for other companies for this investment to continue," said Gil Luria, head of technology research at D.A. Davidson and one of only eight of 78 analysts tracked by Bloomberg who doesn't have a buy rating on the shares. Outside of hardware makers like Nvidia, the most visible AI revenue growth is coming from the big web services providers like Amazon, Google Cloud and Microsoft's Azure. However, it's still a relatively small amount compared with how much the companies are spending on developing the technology. So far, few of the tech giants' cloud computing customers are seeing significant revenue growth from AI. Salesforce.com Inc. shares have rallied on high expectations for new AI offerings, but the customer relationship management software company hasn't seen much of a sales boost yet. Palantir Technologies Inc., which makes data analysis software, has said its AI services are driving revenue growth. "It's imperative that the hyperscaler customers start generating meaningful returns," Luria said. Competition Nvidia has a virtual monopoly on AI accelerators and is attempting to stay ahead of the competition by speeding up the pace for rolling out new chip lines. Its latest, Blackwell, initially faced manufacturing challenges that slowed its release. But Huang said it's in full production now and will begin shipping in the current quarter, adding that demand for Blackwell is "very strong" and expected to exceed supply for several quarters. Advanced Micro Devices Inc. is probably Nvidia's closest competitor. But its projected AI accelerator sales of more than $5 billion in 2024 are just a sliver of Nvidia's expected $114 billion in data center revenue in its current fiscal year. Intel Corp., which is in the midst of a troubled turnaround, is even further behind as weaker than expected orders for AI accelerators have led to sales that the company said won't reach its target of $500 million for 2024. Meanwhile, chipmakers Broadcom Inc. and Marvell Technology Inc. are gathering momentum in sales of custom-made semiconductors and networking components used in data centers. Broadcom forecast in December that the market for the AI components it designs will reach as much as $90 billion by fiscal 2027, sending its shares soaring and raising concerns that so-called ASIC chips could take share away from Nvidia. However, it's unlikely that those custom chips will hurt Nvidia much given Blackwell's significant technological advancement, according to Morgan Stanley analysts led by Joseph Moore. "Competing directly with Nvidia on cluster level specifications will likely remain a challenge," they wrote in December. And then there are the chipmaker's biggest customers, who are hustling to develop their own semiconductors to avoid Nvidia's high prices. Amazon has begun shipping the second generation of Trainium, which it aims to string together in clusters of up to 100,000 chips. Alphabet's Google began building an AI chip a decade ago, and the latest edition is expected to be widely available this year. Microsoft Corp. announced an accelerator called Maia and a central processing unit in late 2023. Valuation How much investors will pay for Nvidia's stock comes down to its growth outlook. With customers set to spend more on hardware and competition still playing catch up, that view looks bright at the moment. The shares are priced at 30 times profits projected over the next 12 months, below the average over the past decade of 34 times, according to data compiled by Bloomberg. Still, that valuation requires Nvidia's profits to continue to boom at a time when growth is slowing and higher costs related to the development of Blackwell are expected to weigh on margins. Nvidia sales are projected to climb 112% in fiscal 2025, 53% in fiscal 2026 and 21% in fiscal 2027. Its gross margin is expected to dip as low as 73% in the current quarter, down from 75% in the previous period, Nvidia said in November. However, it anticipates margins rebounding when production ramps up. For a company that's growing as fast as Nvidia, it all adds up to a fair price, according to Scott Yuschak, managing director of equity strategy at Truist Advisory Services. "There's still plenty of growth left for Nvidia in 2025 and there's still reason to be interested in the stock," Yuschak said. "Still, that number depends on bigger and bigger spending. If there are any signs of a slowdown in AI spending, the price investors are willing to pay for Nvidia shares will fall." --With assistance from Ryan Vlastelica and Subrat Patnaik.

Can 2024's Best-Performing Dow Jones Stock Beat the S&P 500 Again in 2025?

Nvidia (NVDA -3.00%) was added to the Dow Jones Industrial Average (^DJI -1.63%) in November 2024. So, technically, it was only in the index for a small portion of the year. But it was still, by far, the best-performing Dow stock in 2024 with a 171.2% return, walloping second-place Walmart's 71.9% gain and third-place American Express' 58.4%. Nvidia stock went up a mind-numbing 818.9% between 2023 and 2024, which may lead some investors to question how much further it can run before its valuation gets stretched too thin. Here's why the rally in Nvidia stock is somewhat justified, why Nvidia could continue outperforming the market and is worth buying, and some reasons to keep Nvidia on a watchlist for now. Nvidia's momentum knows no bounds Nvidia followed up a rip-roaring 2023 with another incredible year in 2024 -- briefly becoming the most valuable company in the world before Apple reclaimed the title. Nvidia has defended its commanding lead in the graphics processing unit (GPU) market despite a slew of competition. In December, Nvidia announced that its Blackwell architecture for generative artificial intelligence (AI) was coming to Amazon Web Services. On Jan. 3, Microsoft said it plans to spend $80 billion in its current fiscal year to "build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world." On Jan. 7, Amazon said it plans to spend $11 billion in the U.S. state of Georgia alone on AI infrastructure and cloud technologies. Nvidia could easily beat the market again in 2025 because it continues to innovate, and AI spending is showing no signs of slowing down. Nvidia rallied to an all-time high on Monday in response to news that Nvidia customer Hon Hai Precision Industry (also known as Foxconn) is seeing massive growth for AI in cloud and networking. The rally could have also been driven by anticipation of Nvidia CEO Jensen Huang giving the keynote address at CES, a major technology conference in Las Vegas. However, Nvidia pulled back 6.2% on Tuesday after Huang's keynote. Nvidia will report its fourth-quarter and full-year fiscal 2025 results on Feb. 26. Analyst consensus estimates call for $2.95 in fiscal 2025 earnings per share and $4.43 in fiscal 2026 earnings per share -- implying year-over-year growth of 50%. So it's worth understanding that there are lofty expectations already baked into Nvidia's forward price-to-earnings (P/E) ratio of 50.6. The power of earnings growth Nvidia is by no means a cheap stock based on near-term expectations. But it could grow into its valuation over time if it continues innovating and sees sustained product demand. No force is more powerful in the stock market than earnings growth. Earnings growth can justify a premium valuation and make a stock quickly look cheap. For example, if Nvidia stock returns 20% per year over the next five years but averages 30% earnings growth in that period, its forward P/E will decline from its current level of around 51 to under 30. This lesson demonstrates why excellent earnings growth can make expensive stocks look like a good value for long-term investors. As long as Nvidia continues on its path, it should have no problem outperforming the S&P 500 (^GSPC -1.54%). However, if there's a major industrywide slowdown or competition heats up, it wouldn't be surprising to see Nvidia sell off. Rapidly growing earnings sets Nvidia apart Nvidia has been at the forefront of a rapidly growing industry. Earnings are soaring, and so is the stock price. But for earnings to keep going up, Nvidia has to lap its difficult comps. That could become challenging if the investment cycle enters a slowdown or less expensive alternatives, like chips made by Advanced Micro Devices, eat away at some of Nvidia's market share. The buy case for Nvidia is quite simple. If you believe the company will remain a long-term winner in AI, the stock is worth buying and holding. But it's worth understanding that Nvidia's sky-high operating margins, market share, and growth rate may not be sustainable over the long term. Even if revenue growth remains strong, Nvidia's earnings growth could fall if its margins come down. Nvidia's trailing 12-month gross margin is 75.9%, and its operating margin is 62.7% -- meaning it's converting the majority of sales into operating income, a truly unbelievable feat. But earnings growth can slow down Nvidia's high profitability comes from the ability to set premium prices for its products, which deep-pocketed customers willingly pay to further their AI ambitions. If those customers aren't able to monetize AI as well as they hoped, they could slow their pace of AI spending, which would affect Nvidia even if it continues cranking out great products. Put another way, Nvidia needs to continue making great products, and its customers must be able to afford those products. For example, companies can spend money on Nvidia computing hardware for self-driving vehicles, but those vehicles must sell to justify future order volumes. Just as the buy case for Nvidia is fairly straightforward, I think the reasons to keep it on a watchlist are also simple. Some investors may prefer to take a wait-and-see approach to how Nvidia handles mounting competition, how it performs in an industry slowdown, and if it can continue to be the undisputed industry leader. Nvidia has been at the top of its game, uninterrupted, for a couple of years now. If it keeps it up, it's easy to see how Nvidia could become the most valuable company in the world and maintain position. But it's also possible that spending on AI could flatline for a few years, or that some unforeseen challenges will appear that hinder Nvidia's ability to grow. Approaching an investment in Nvidia Nvidia is priced for strong and sustained growth, but not for perfection. Despite the run-up, it doesn't have a nose-bleed valuation. Instead of trying to time the market, it's better to do some research and decide where you stand on Nvidia. If you decide not to buy the stock now and keep it on a watchlist, it's important to have clearly defined reasons for what needs to change to consider buying the stock. That way, you can ensure you are using business performance as a measuring stick, and not the stock price.

Nvidia Was One of the Largest Companies by Market Cap in 2024. Will Its Reign Continue in 2025? | The Motley Fool

While the other two big tech players have been at the top for many years, Nvidia wasn't even in the top 20 in 2021. This highlights its incredible climb over the course of the last few years. Market capitalization -- the result of multiplying a company's share price by the number of outstanding shares -- is an imperfect measure of a company's value, but it's a useful guide. It's certainly reflective of a company's dominance in a market, and Nvidia has been dominant in artificial intelligence (AI). Can investors expect this to continue? The rollout of Blackwell, the newest iteration of Nvidia's Superchips, is imminent, and demand is extremely high. The pace of growth of AI training models is staggering and, despite Blackwell chips being more than twice as powerful as their predecessors, CEO Jensen Huang explained that customers are demanding an even greater number of Blackwells for their data centers. He told analysts that current versions of AI models could use a maximum of 100,000 of the previous Hopper chips, but new models start at 100,000 Blackwell chips. That's driving a demand that he referred to as "insane." It's been reported Nvidia is sold out of Blackwell for at least 12 months, even as it attempts to ramp up production, partnering with Foxconn to build the world's largest Blackwell production facility in Mexico. Investors will see how this plays out, but things look good for the rollout of the company's most important product. Its successful launch will drive sales, likely leading to another year of growth in the healthy double digits. Morgan Stanley analysts believe there could be a 44% gain in top-line revenue over the next year. Since the AI boom took off, the lion's share of Nvidia's revenue has flowed in from Silicon Valley companies that build and operate the physical data centers that enable AI -- think Alphabet and Microsoft. The latter announced recently that it expects to spend a staggering $80 billion in AI infrastructure in fiscal year 2025. That represents a 60% increase from 2024's roughly $50 billion and is significantly more than the $63 billion some analysts expected. Last year's spend was already a record amount and significantly more than the year before. Look at Microsoft's growth in capital expenditures over the last five years -- the majority of this has come from building AI data centers and buying Nvidia chips. This trend isn't leveling off but accelerating and is great news for companies like Nvidia that are downstream of this spending. It's also very unlikely that Microsoft will be alone in this. If Microsoft expects to grow its AI spending to this degree, you can be sure that others around Silicon Valley will follow suit. All signs at the moment point to Nvidia continuing to dominate an ever-expanding market -- one that PwC, one of the "big four" accounting firms, believes can add $15.7 trillion to the global economy by 2030. Is Nvidia's client base tightening their belts? Signs of this are not only absent, but also the opposite of what's been happening. The massive expansion of AI data center spending by Microsoft is a critically positive sign for Nvidia and its bottom line, at least for the next year. I believe that Nvidia's reign will continue through 2025. It's also very possible that it will take the top spot, leapfrogging Apple to once again become the largest company in the world.

Prediction: 2 AI Stocks Will Be Worth More Than Nvidia by Year-End in 2025 | The Motley Fool

Nvidia shares have surged over 180% since January 2024, and the stock accounted for nearly one-quarter of the gains in the S&P 500 (SNPINDEX: ^GSPC) during that period. The company is now worth $3.4 trillion and should continue to benefit from the artificial intelligence (AI) boom for many years to come. But public clouds may take the momentum lead in 2025. Investments in AI infrastructure made in the last two years position cloud computing companies to benefit as businesses turn AI prototypes into products this year. That leaves room for Amazon (AMZN -1.44%) and Alphabet (GOOGL -0.98%) (GOOG -1.14%) to surpass Nvidia's current market value before the end of 2025: Admittedly, both predictions are aggressive. But Bloomberg Intelligence estimates generative AI spending will grow 71% in 2025, and Wall Street may be underestimating how much Amazon and Alphabet will benefit. Amazon reported solid financial results in the third quarter, beating expectations on the top and bottom lines. Revenue increased 11% to $159 billion on especially strong sales growth in cloud and advertising services. Operating margin expanded 5 percentage points to 9.8%, and non-GAAP (generally accepted accounting principles) earnings soared 52% to $1.43 per diluted share. Analysts expected earnings to grow 21%. Amazon could continue to exceed estimates as artificial intelligence (AI) spending increases. Amazon Web Services (AWS) accounted for 31% of public cloud services spending in the third quarter, nearly as much as the 33% market share Microsoft and Alphabet had combined. That scale is a key advantage. With more customers and partners, AWS is better positioned to monetize AI. However, Amazon is also investing aggressively in AI product development. Its custom AI chips, Trainium and Inferentia, provide a cheaper alternative to Nvidia graphics processing units (GPUs). Its Bedrock platform enables developers to fine-tune pretrained large language models and build generative AI applications. And its conversational assistant, Amazon Q, helps programmers code, test, and deploy software. Wall Street estimates Amazon's earnings will increase 26% over the next four quarters. That consensus makes the current valuation of 47 times earnings look very reasonable. But the company's earnings could grow more quickly as demand for cloud AI services increases. In turn, that may justify a higher valuation and push the company's market value to $3.5 trillion. For instance, if Amazon's earnings grow 35% in the next four quarters and shares trade at 54 times earnings (below its peak of 62 times earnings in the past year), its share price would increase 52% and its market value would reach $3.5 trillion. However, Amazon is a worthwhile long-term investment even if the company fails to surpass Nvidia's current market value by the end of 2025. Alphabet reported encouraging financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 15% to $88 billion on especially strong sales growth in Google Cloud and modest growth in Google services (advertising). Meanwhile, GAAP net income increased 37% to $2.12 per diluted share. Analysts expected earnings to grow 19%. Alphabet may continue to top estimates as demand for AI cloud services increases. Google Cloud gained 2 percentage points of market share in the past year, while Microsoft lost 3 percentage points. And Google's investments in AI product development may keep that trend in motion. Importantly, Google is the only company besides Amazon to deploy custom AI chips at scale, according to New Street Research. More broadly, Google has a strong position in several AI product categories. Forrester Research recently recognized its leadership in AI infrastructure solutions, machine learning platforms, and foundational large language models. In one report, analyst Mike Gualtieri called Google the hyperscaler best positioned for AI and said the company offers enough differentiation that it may win clients from other public clouds. Wall Street estimates Alphabet's earnings will increase 14% in the next four quarters, which makes its current valuation of 26 times earnings look fair. But generative AI spending could lead to above-consensus earnings, and the valuation multiple could expand once investors have more clarity on the outcome of the antitrust case involving Google Search later this year. Collectively, those tailwinds could help Alphabet surpass Nvidia's current market value by the end of 2025. For instance, if earnings increase 25% over the next four quarters and the stock trades at 30 times earnings when that period ends, its share price would advance 46% and the company would be worth $3.5 trillion. However, Alphabet is a worthwhile long-term investment, even if my prediction doesn't pan out.

Jensen Huang's vision for Nvidia brings confidence to investors

Jensen Huang founded Nvidia in 1993 and has served as CEO and president since then. Last week, he delivered a keynote speech at CES 2025, highlighting the company's significant position in the advancing technological landscape. Nvidia, renowned for developing the graphics processing unit (GPU) in 1999, has established itself as the standard for rendering graphics in 3D design and gaming applications. More recently, its GPUs have become the preferred choice for complex data center workloads, particularly for training large language models and running generative artificial intelligence applications. The surge in interest in generative AI began with the launch of ChatGPT in late 2022, creating increased demand for Nvidia GPUs, which led to triple-digit earnings growth over the last six quarters and an 840% share price increase in the past two years. Despite some investor concerns that generative AI represents a temporary trend, Huang emphasized at CES that this technology is just the beginning of a broader revolution. He stated, "The next frontier of AI is physical AI," which aims to facilitate interactions with the physical world. Huang noted that while generative AI generates media, physical AI will enable machines to navigate and interact in real environments. The first form of intelligent robots most people will interact with is expected to be autonomous cars. Nvidia has developed products to address all three layers of the autonomous vehicle computing stack. Its GPUs provide the supercomputing infrastructure necessary for training AI models; the Drive platform offers software development tools to create self-driving applications; and AGX systems deliver the in-vehicle computing power required for navigation. How Nvidia's CES remarks caused Rigetti's 45% stock plunge In a recent interview, Huang stated that Nvidia's autonomous driving products may achieve a revenue run rate of $5 billion this year, markedly higher than the $1.8 billion reported in the last quarter. Currently, the automotive and robotics segments represent the company's smallest areas, but growth is anticipated. Citigroup projects that the number of autonomous vehicles will increase nearly five-fold by 2030 and fourteen-fold by 2035. During his CES address, Huang also remarked, "The ChatGPT moment for robotics is coming." He introduced Cosmos, a suite of pretrained robotics models available for developers to fine-tune. Nvidia's offerings span all three layers of the robotics computing stack as well: GPUs provide the necessary supercomputing power for training robotics models; the Isaac platform supports development across various applications, including industrial manipulation, autonomous vehicles, and humanoid robots; and Jetson embedded systems integrate GPUs, CPUs, and memory into a single unit for robot interaction with their environments. Nvidia is ideally situated to capitalize on the evolving landscape as AI progresses into robotics. Citigroup estimates spending in the robotics sector could exceed $200 billion by 2035 and $1 trillion by 2040. Regarding Nvidia's stock performance, many investors perceive it as expensive, noting an 840% return over two years. However, shares currently trade at 55 times earnings, a reasonable valuation considering projected earnings growth of 38% annually over the next three years, resulting in a price-to-earnings-to-growth (PEG) ratio of 1.4. In contrast, two years ago, the stock traded at 63 times earnings, with anticipated earnings growth of 22% annually, resulting in a much higher PEG ratio of 2.9. Therefore, Nvidia's stock is relatively cheaper today than it was before the generative AI surge.

Nvidia's $3 Trillion Rally Is On Edge, Wall Street is Unfazed

Nvidia Corp.'s $3 trillion run-up in market value in the two years since ChatGPT helped trigger an AI frenzy is bigger than any stock rally in history in such a short time span. But the landscape is now changing for the chipmaker. Competitors and customers are stepping up efforts to take a bigger slice of the artificial intelligence chip market. The sector's blistering revenue growth is slowing. The Biden White House is looking to limit the sale of Nvidia's most-advanced chips abroad, although it's unclear how President-elect Donald Trump's incoming administration will handle that.

Meet the Incredible Artificial Intelligence (AI) Stock That Could Pass Apple, Nvidia, and Microsoft on Its Way to a $5 Trillion Valuation by 2030 | The Motley Fool

This company is spending as much as anyone on AI infrastructure, and it's paying off already. Many analysts on Wall Street expect to see the first $4 trillion company sometime in 2025. Nvidia (NVDA -3.00%) has seen its value soar amid rampant artificial intelligence (AI) spending as big tech companies race to build out bigger data centers and train more advanced AI models. With big tech planning to spend even more in 2025, its strong results should continue. Its market cap climbed from $416 billion the day OpenAI released ChatGPT to $3.43 trillion as of this writing. The only company Nvidia trails in size is Apple (AAPL -2.41%), which has long sat at or near the top of the world's most valuable companies. Apple's massive iPhone user base has supported a growing services business over the past decade, and AI could propel that services business in 2025 as it integrates more advanced capabilities into its iOS and macOS operating systems. Its market cap sits at $3.67 trillion as of this writing. Meanwhile, Microsoft (MSFT -1.32%) is leading in AI on two fronts. An early investment in OpenAI gave it the integrations it needed to sell developers on its Azure cloud computing platform. Azure sales have accelerated as a result, and management expects that trend to continue in 2025. Meanwhile, Microsoft's leading position in enterprise productivity software and PC operating systems gives it a huge market for its Copilot AI agents, which help improve accuracy and worker productivity. It has a market cap of $3.16 trillion as of this writing. Any of the above could become the first $4 trillion company in 2025. But one company could leapfrog them on the path to $5 trillion by the end of the decade. The big reason for all of the excitement around AI is its ability to transform multiple industries. And one company has its hand in several of those industries: Amazon (AMZN -1.44%). That's why it could be the first company to reach a $5 trillion valuation. Amazon is one of the biggest investors in AI. Management said during its third-quarter earnings call in September that it expected to spend $75 billion on capital expenditures in 2024. The majority of that spending will go toward its cloud computing business, Amazon Web Services (AWS), and other technology infrastructure. Some will go toward the continued build-out of its logistics network. Amazon's spending is absolutely massive, but it's proven to be well worth the price. Even while investing more than any other big tech company, it's generating record amounts of free cash flow. Free cash flow climbed to $47.7 billion over the trailing 12 months in Q3, more than doubling year over year. Those strong financial results are driven by Amazon's diverse operations. AWS has been a strong driving force. AWS sales accelerated in 2024, increasing 19% year over year in Q3. Moreover, AWS now has substantial scale, which shows up in operating income growth of 49% in Q3. AWS growth is powered by Amazon's support for advanced AI development across multiple foundation models. It continues to work on more efficient, custom-built AI accelerators for training and inference, which give its customers lower-cost options compared to Nvidia's chips. Meanwhile, the core of Amazon has always been its e-commerce business. Amazon continues to grow its share of e-commerce year after year despite strong competition from big-box retailers improving their online operations and ultra-cheap alternatives like Temu and Shein. The main reason Amazon has proved so successful at defending and expanding its lead is its Prime membership. Prime subscriptions give customers free one-day shipping on millions of items on Amazon's marketplace along with various other benefits, including Prime Video. The growth of Prime is a virtuous cycle whereby more members attract more merchants offering a wider variety of goods, in turn attracting more Prime members. Amazon's subscription services revenue continues to climb at a double-digit pace despite its high penetration rate among consumers. Amazon isn't just standing by and letting the flywheel spin. It's actively pushing. It overhauled its logistics operations in 2023 to focus on multiple regions throughout the United States. It uses advanced algorithms that predict demand and monitor in-stock levels to ensure items remain in stock across each region. The new regionalized network forms the foundation of a burgeoning logistics services business as well. Finally, Amazon's strong position in e-commerce has helped it build a massive digital advertising business. Ad sales totaled $53.6 billion over the trailing 12 months. Amazon should be able to sustain that pace as it expands video advertising (all Prime memberships include ad-supported streaming by default). Generative AI has the potential to supercharge ad sales on Amazon, especially considering Amazon's scale and data, which can fuel iterative testing for ad campaigns, ensuring better conversions for merchants. Amazon's business is operated with one key metric in mind: long-term, free-cash-flow generation. To that end, it's been a wild success. As mentioned, free cash flow totaled $47.7 billion over the last 12 months. That's up from about $1 billion 10 years ago. Over the next five years, free cash flow could climb even higher. AWS, fueled by the growth of AI, is showing strong improvements in operating income. Despite the massive spending to build out new data centers, develop its own chips, and attract new customers with improvements to the platform, growth is outpacing the increased spending. Moreover, Amazon is currently undergoing a massive investment cycle. The $75 billion in expected 2024 capital expenditures is a new record for the company. It's likely to increase further in 2025. But eventually, that spending will plateau. At that point, Amazon will reap what it's sown across AWS, its logistics network, and its e-commerce business (which fuels its advertising business). That cycle has played out multiple times for Amazon over the last 30 years. Historically, Amazon has traded around 50 times free cash flow. At that multiple, it would be worth $5 trillion once it produces $100 billion in free cash flow. That may happen sooner than investors expect given the strong growth in free cash flow looks poised to continue soaring through the end of the decade.