Nvidia's AI Dominance Fuels Optimistic 2025 Outlook

Prediction: Nvidia Stock Is Going to Soar Past $200 in 2025 | The Motley Fool

Nvidia's latest artificial intelligence chips could carry its stock to new heights in 2025. Nvidia (NVDA 3.14%) is the leading supplier of graphics processing units (GPUs) for data centers, which are used to develop artificial intelligence (AI) models. Demand is heavily outstripping supply for those chips, and it's driving an incredible surge in the company's financial results. Nvidia CEO Jensen Huang believes data center operators will invest $1 trillion over the next four years to upgrade their infrastructure in order to meet demand from AI developers. That estimate might be conservative, based on forecasts from other sources. I think there is a clear mathematical path for Nvidia stock to soar by another 82%, which would take it comfortably above $200 in 2025. Here's why. Nvidia's H100 GPU was so popular in 2023 that the company had a whopping 98% share in the market for AI data center chips. It's still a top seller today, but data center operators are lining up to buy Nvidia's latest chips, which are built on its new Blackwell architecture. They offer a significant leap in performance, meaning they can process high volumes of data more quickly in AI training and AI inference workloads. The Blackwell-based GB200 NVL72 system can perform AI inference at 30 times the speed of the equivalent H100 system. A single GB200 GPU within the NVL72 system sells for around $83,000, and while that's roughly double the price of an H100, the 30-fold increase in inference performance translates into significant cost savings for any company deploying AI. Microsoft is reportedly the largest buyer of Blackwell GPUs so far. It will use them to develop AI for its own purposes, but it will also rent the computing capacity to other AI developers for a fee through its Azure cloud platform. Amazon Web Services, Alphabet's Google Cloud, and Oracle are likely to be large Blackwell customers for the same reasons. Nvidia shipped 13,000 Blackwell samples to customers during its recent fiscal 2025 third quarter (ended Oct. 27), but Jensen Huang says demand is "staggering," so that number will probably grow rapidly. Morgan Stanley predicts that Nvidia will ship up to 300,000 units in the last three months of calendar 2024, followed by 800,000 units in the first three months of 2025. Nvidia says Oracle alone is building clusters using more than 131,000 Blackwell GPUs, and since Oracle is spending far less on AI capital expenditures (capex) than cloud providers like Microsoft and Amazon, Morgan Stanley's estimates probably aren't far off the mark. Nvidia's fiscal year is different from the regular calendar year. As I mentioned above, the company is currently in fiscal 2025, which will end less than two months from now on Jan. 30, 2025. As a result, Nvidia's fiscal year 2026 will occupy most of the calendar year 2025. Nvidia's revenue is on track to come in at a record $128.7 billion for fiscal 2025 (according to the company's guidance), which would be a whopping 111% increase from fiscal 2024. At least 80% of that revenue will come from its data center segment, which is where sales of AI GPUs like the H100 and GB200 are accounted for. Wall Street's consensus estimate for fiscal 2026 (provided by Yahoo) suggests Nvidia's total revenue will climb to another record high of $195.4 billion. You will notice that represents growth of 51%, which would be less than half the growth rates from fiscal 2024 and fiscal 2025. Nvidia's revenue numbers are becoming so large that it's impossible for the company to maintain triple-digit percentage increases. That isn't necessarily a bad thing, especially because AI infrastructure spending is forecast to increase significantly from here. As I mentioned earlier, Huang predicts there will be $1 trillion in AI infrastructure spending over the next four years. Well, Morgan Stanley believes that just four companies -- Microsoft, Amazon, Alphabet, and Meta Platforms -- will spend a combined $300 billion in 2025 alone. That doesn't include other big spenders like Oracle, OpenAI, or even Tesla. Therefore, Huang's estimate might be too conservative. Nvidia's dominant market share in the data center GPU space affords it a significant amount of pricing power. In other words, demand is so strong that it can charge extremely high prices, which is boosting the company's profit margins. That's why Nvidia's earnings per share (EPS) soared by 103% in the recent third quarter. Based on the company's trailing 12-month EPS of $2.62, its stock trades at a price-to-earnings (P/E) ratio of 56.1 as of this writing. That sounds expensive at face value, because the Nasdaq-100 technology index trades at a P/E ratio of just 33.9. However, Nvidia's average P/E ratio over the last 10 years is 58.6, so you could argue that the stock is actually cheap right now. Looking ahead, Wall Street's consensus estimate suggests that Nvidia's EPS could come in at $4.43 in fiscal 2026. That places the stock at a forward P/E ratio of just 32.1. This means the stock will have to soar 82% next year just to trade in line with its 10-year average P/E of 58.6, which implies a stock price of $259! I can't believe I'm saying this because Blackwell shipments are only just ramping up, but one Wall Street analyst thinks Nvidia's next GPU architecture (called Rubin) could be six months ahead of schedule. That might be yet another upside catalyst for the stock if Nvidia reveals more information over the next 12 months.

Is Nvidia the Top Artificial Intelligence (AI) Stock to Own in 2025? | The Motley Fool

Few stocks have done as consistently well as Nvidia (NVDA -2.69%) over the past two years. Since the start of 2023, it's up around 900% after posting incredible returns in both 2023 and 2024. Now the question is, can Nvidia three-peat and be a top performer in 2025? 2025 will likely be the most difficult year of the three, as Nvidia's growth is starting to slow (although it's still strong). But is Nvidia still the top artificial intelligence (AI) stock to own for 2025? Nvidia has risen to the top of AI investments because it has become the building block on which AI models are built and trained. Its graphics processing units (GPUs) and the software that controls them, CUDA, are best in class. When speed is the name of the game, it doesn't leave room for second-place companies that cannot match Nvidia's performance. GPUs are a top tool for the job because they can process multiple calculations in parallel. This benefit can be further multiplied by connecting thousands of GPUs in computing clusters. With many of the largest AI and cloud computing companies buying thousands of GPUs every month, Nvidia's business has boomed, driving the stock higher. As a positive point for Nvidia's stock, this trend looks like it will continue in 2025. Meta Platforms informed investors that they should expect a "significant acceleration in infrastructure expense growth" in 2025. Clearly, that means Nvidia will benefit from further spending over the next year. Meta isn't alone in this. Other top spenders like Microsoft and Amazon also provided commentary that their high spending will continue next year. This is a great sign for Nvidia, as it indicates that the industry hasn't reached peak GPU demand yet. But is 2025's growth already baked into the stock price? When companies see a huge growth wave, it isn't uncommon for their stock's valuation to skyrocket as the market starts to price in future growth. As the business gains are realized, this valuation slowly comes down. However, Nvidia's stock isn't doing that. This chart shows Nvidia's one-year forward price-to-earnings ratio, which prices the company using next year's projected earnings. At 33 times fiscal year 2026 earnings, Nvidia's stock is the most expensive it has been. However, you have to consider whether Nvidia would be fairly valued if that was its price tag. Considering that companies like Apple and Microsoft trade for 29 times next fiscal year's earnings, the slight premium you have to pay for Nvidia's top-notch growth seems worth it. For fiscal year 2026 (Nvidia's fiscal year that encompasses most of 2025), Wall Street analysts project more than 50% revenue growth. This will likely come on the back of Nvidia's next-generation Blackwell infrastructure, which provides a huge performance boost over its current architecture, Hopper. The performance boost could cause many to upgrade their computing servers to outpace their competitors, a trend that likely won't be completed in 2025. As a result, Nvidia still has plenty of tailwinds propelling it forward, making it a solid stock for 2025. However, investors need to understand that the stock likely won't rise like it has in 2023 or 2024. Instead, I'd expect a modest double-digit gain but likely a high enough level to beat the market. As a result, Nvidia seems like another top AI stock for 2025, although it doesn't have as high of a return potential as it did the past two years.

1 Stock-Split AI Stock to Buy Before It Soars 450%, According to a Wall Street Expert | The Motley Fool

Philip Panaro is a founder and former CEO of Boston Consulting Group (BCG) Platinion, a division of BCG that offers technology consulting services. During an interview in November, Panaro told Schwab Network that Nvidia (NVDA -1.81%) could hit $800 per share by 2030 due to its leadership in artificial intelligence (AI) accelerators. That forecast implies about 450% upside from its current share price of $145. Of course, Nvidia has been one of the hottest stocks on the market. Its share price has surged over 900% since the late-2022 launch of ChatGPT led to an exponential increase in demand for AI infrastructure. The company conducted a 10-for-1 stock split earlier this year to compensate for that price appreciation, and another split may be in the cards if Panaro is correct. Here's what investors should know. Nvidia holds 98% market share in data center graphics processing units (GPUs), chips used to accelerate complex data center workloads, such as training machine learning models and running artificial intelligence applications. One reason for that dominance is superior chip performance. Nvidia regularly achieves the highest scores at the MLPerfs, objective tests that benchmark the capabilities of AI systems. But there is another reason Nvidia accounts for virtually all data center GPU sales: It spent the better part of the last two decades building an expansive software ecosystem. In 2006, Nvidia introduced its CUDA programming model, a platform that now spans hundreds of code libraries and pretrained models that streamline AI application development across use cases ranging from autonomous cars and robots to conversational agents and drug discovery. Additionally, Nvidia has branched into other hardware verticals, like central processing units (CPUs) and networking gear. Indeed, Nvidia has a leadership position in InfiniBand networking, currently the most popular connectivity technology for back-end AI networks. The ability to integrate hardware components into a cohesive computing system lets Nvidia build data centers with the lowest total cost of ownership, according to CEO Jensen Huang. Here is the big picture: Competing with Nvidia is exceedingly difficult. Its GPUs are not only the fastest AI accelerators on the market but are also supported by the most robust software development platform. And Nvidia has another key advantage in vertical integration. Consequently, while it has more pricing power than its peers, Nvidia systems are less expensive when accounting for direct and indirect costs. Looking ahead, AI accelerator sales are forecast to grow by 29% annually through 2030, and the broader market for AI hardware, software, and services is projected to increase by 37% annually during that period. Nvidia is perhaps the company best positioned to benefit from that spending. Wall Street expects Nvidia's adjusted earnings to increase by 52% annually through fiscal 2026, which ends in January 2026. That consensus estimate makes the current price-to-earnings (P/E) ratio of 54 look quite reasonable. Those numbers give Nvidia a price/earnings-to-growth (PEG) ratio of a little higher than 1, the threshold at which conventional wisdom says a stock is undervalued. In practice, not many high-growth technology companies have PEG ratios close to 1, and values between 1 and 2 are often accepted as reasonable. To illustrate why Nvidia appears reasonably priced despite major price appreciation in the last two years, I have listed the current PEG ratios for other popular AI stocks. Every value was calculated in the same way. Despite being reasonably priced, I am skeptical about Nvidia reaching $800 per share by 2030. Earnings will almost certainly be growing more slowly by that point, which means the P/E ratio will probably contract to a meaningful degree. However, I believe there is still upside in this stock for patient investors.

Mizuho says Nvidia stock is set to hit $170 in Q1 2025. Here's why By Investing.com

Mizuho (NYSE:MFG)'s analyst Jordan Klein sees a bullish outlook for NVIDIA's stock, predicting that the company's management will present a very optimistic view during investor meetings at the upcoming CES in early January. The research firm anticipates that NVIDIA's stock could reach the $160-170 level leading into the GPU Technology Conference (GTC) in March and the unveiling of their new product, Rubin. This forecast is further supported by the strong financial results and the strategic positioning of NVIDIA in the growing AI market. Nvidia (NASDAQ:NVDA) shares closed at $139.31 on Wednesday. A few weeks ago, Nvidia announced a record-breaking revenue for the third quarter ending October 27, signaling a robust performance that has set the company on a path for potential new all-time highs. The Santa Clara-based tech giant reported a quarterly revenue of $35.1 billion, marking a significant 17% increase from the second quarter and an impressive 94% rise from the same period the previous year. The company's data center revenue also reached new heights, with a record $30.8 billion, which is up 17% from the previous quarter and a substantial 112% from the year-ago quarter. Back then, NVIDIA's CEO Jensen Huang emphasized the momentum of AI technology and the global transition to NVIDIA's computing solutions. He highlighted the high demand for Hopper and the anticipation for Blackwell, both of which are in full production and are key drivers for the company as they meet the scaling needs of foundation model makers in pretraining, post-training, and inference.

History Says the Nasdaq Will Surge in 2025. 1 Stock-Split Stock to Buy Before It Does. | The Motley Fool

This investor favorite has been on an epic run over the past couple of years and shows no signs of slowing. The Nasdaq Composite has been on fire over the past couple of years, driven higher by the advent of artificial intelligence (AI), improving economic conditions, an uncontested election, and the Federal Reserve Bank's recent moves to cut interest rates. After returning 43% in 2023, the tech-centric index is up roughly 30% in 2024. History suggests the rally will likely continue into 2025. The current bull market began on Oct. 12, 2022, and while every rally is different, history can provide important context. Bull markets last more than five years, on average. Since the current rally just entered its third year, there's a strong likelihood the Nasdaq will continue to gain ground next year. It's also worth noting that the Nasdaq has generated gains 73% of the time, dating back 53 years, so history is on the side of investors. Finally, the Nasdaq has jumped 12%, on average, in years following positive gains, which suggests there's additional upside ahead. Furthermore, there's been a resurgence in the popularity of stock splits over the past few years. As a result, investors are taking a renewed interest in companies that split their shares, as this is historically preceded by years of robust sales and profit growth. One such company is Nvidia (NVDA -1.81%). The stock has gained 26,920% over the past decade (as of this writing), prompting management to initiate a 10-for-1 stock split earlier this year -- after a 4-for-1 split in 2021. Despite its recent run-up, there's reason to believe that Nvidia's growth spurt will continue into 2025. Read on to find out why. The adoption of generative AI has spread like wildfire over the past two years as businesses are eager to share in the productivity increases promised by these advanced algorithms. Generative AI has proven adept at drafting and summarizing emails, searching and abbreviating content, mining data, generating original content, and writing computer code -- and new applications are being discovered every day. Automating and streamlining tasks saves users time and money, driving new users to adopt AI. Nvidia pioneered the graphics processing units (GPUs) that make this all possible. These specialized chips provide the sheer number-crunching capability that brought AI to life. The secret lies in parallel processing or breaking up computer-intensive jobs into smaller, more manageable bits. Nvidia first developed these chips to render lifelike images in video games but soon discovered other applications for this breakthrough technology, including data centers, high-performance computing (HPC), and machine learning -- an earlier branch of AI. The vast majority of AI processing is done in the cloud and in data centers, another factor that directly benefits Nvidia. The company controls as much as 98% of the data center GPU market, according to semiconductor analyst firm TechInsights. As evidenced by its entrenched position, Nvidia has become the gold standard for AI processing. There's always talk of ramping up competition, but thus far, Nvidia remains the king of the hill. To understand the magnitude of Nvidia's rise, a look at its financial results is in order. After generating triple-digit sales and profit gains last year, the company's impressive win streak continues. During its fiscal 2025 third quarter (ended Oct. 27), Nvidia delivered record revenue of $35.1 billion, up 94% year over year. It also delivered earnings per share (EPS) of $0.78, up 111%. For context, the company generated more sales in one quarter than it produced for all of fiscal 2022. The biggest contributor to its success was the company's data center segment, which includes cloud computing, data center, and AI chips, and grew 112% year over year to $30.8 billion. Wall Street expects Nvidia's growth streak to continue. For its fiscal 2026 (which begins in late January), consensus estimates are calling for revenue of $195 billion, which would represent a year-over-year increase of 51%. However, the highest estimate clocks in at more than $269 billion, which would represent growth of more than 100%. Wall Street is notorious for underestimating Nvidia's growth, so the reality is likely somewhere in between. Nvidia will begin shipping its next-generation Blackwell platform later this year, and by all accounts, the company has another market leader on its hands. Bank of America analyst Vivek Arya contends that investors continue to underestimate the magnitude of the demand for Blackwell, which he believes will be outselling Nvidia's Hopper chips within two to three quarters. There's also a big disconnect between Nvidia's addressable market and how investors perceive it: They really are a system integrator at this point. They're selling complete racks with all the computing, the networking, the optical resources, the memory, everything thrown in. That is why the revenue monetization opportunity is so much greater [than investors appreciate]. The analyst goes on to say that Nvidia bundles its software with these myriad systems. All these opportunities, taken together, help illustrate why Nvidia's addressable market continues to expand. Yet, for all that opportunity -- and despite its 183% gains so far this year -- Nvidia is still attractively priced. Wall Street believes Nvidia will generate EPS of $4.42 in fiscal 2026 (which begins in January). That means the stock is currently selling for roughly 32 times forward earnings (as of this writing), which is remarkably cheap in light of the opportunity.

The S&P 500 Is Expected to Jump Over 9% in 2025: 1 Magnificent Stock to Buy Before That Happens | The Motley Fool

This high-flying stock could keep soaring in 2025 following tremendous gains this year. The S&P 500 index has recorded impressive gains of nearly 27% so far this year as of this writing, and it recently breached the 6,000 level for the first time. The good news for investors is that the index is expected to move even higher in 2025. According to analysts at RBC Capital Markets and Barclays, the S&P 500 could hit 6,600 by the end of 2025. That would be an increase of over 9% from current levels. There are other, more optimistic forecasts as well. Yardeni Research and Deutsche Bank, for instance, expect the index to hit 7,000 by the end of next year, while BMO Capital Markets has a target of 6,700. Further drops in inflation and strong growth in the technology sector are two factors expected to positively affect the S&P 500 next year. That's why now's a good time to take a closer look at one S&P 500 component that has delivered impressive gains in 2024 and could replicate its performance next year as well -- Nvidia (NVDA 3.48%). Shares of Nvidia have handsomely outperformed the S&P 500 index this year, with stellar gains of 180% as of this writing. Though the stock has been under pressure of late following the release of its fiscal 2025 third-quarter results (for the three months ended Oct. 27), it may not be long before it renews its upward trajectory. The company generated $91.1 billion in revenue in the first nine months of the fiscal year, a massive jump of 135% over the same period last year. Meanwhile, Nvidia's non-GAAP net income has jumped to $2.10 per share from $0.78 per share in the same quarter last year. The company's fiscal fourth-quarter guidance of $37.5 billion suggests it could end fiscal 2025 with a top line of just under $129 billion. Consensus estimates project that Nvidia will end the fiscal year with $2.95 in earnings per share (EPS). As the following chart tells us, Nvidia is expected to maintain its impressive growth momentum next year as well. However, don't be surprised to see Nvidia's revenue and earnings growing at a faster pace than what Wall Street is projecting. That's because the company saw "staggering" demand for its latest Blackwell artificial intelligence (AI) graphics processing units (GPUs), which are used by major cloud companies for AI training and inference. Morgan Stanley recently reported that Nvidia sold out its capacity of Blackwell chips for the next 12 months. The company's growth next year will only be limited by the number of chips that it can manufacture, considering the outstanding demand. As a result, the company is working aggressively to increase the output of its Blackwell processors to fill as much demand as possible. Taiwan-based daily newspaper DigiTimes reports that Nvidia has secured 60% of the advanced chip packaging capacity of its foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC. It's worth noting that TSMC plans to more than double its advanced packaging capacity next year to meet the surging AI chip demand from the likes of Nvidia. Other reports indicate that TSMC could ramp up its capacity at an even faster pace, taking its advanced chip packaging capacity from 36,000 units per month currently to 90,000 units next year. What's more, TSMC could increase this monthly output to 130,000 units in 2026. All this bodes well for Nvidia, given that the demand for AI chips is forecast to increase at an annual rate of 29% through 2032. This should pave the way for the company to keep growing at an incredible pace in 2025 and beyond. We saw in the chart above that Nvidia's earnings could jump to $4.41 per share in the next fiscal year. However, that estimate has been heading higher as the chart indicates. More specifically, consensus estimates were expecting Nvidia to deliver $3.83 per share in earnings for fiscal 2026 three months ago. Turn the clock back by 30 days, and the bottom-line forecast for next year was at $4.03 per share. There's a good chance that Nvidia's earnings estimate for fiscal 2026 could head higher, thanks to the healthy demand for its chips and the potential improvement in the supply chain. The market could reward its improved earnings power with more upside, which is why it makes sense to buy Nvidia right now. It's trading at 32 times forward earnings, a discount to its five-year average forward earnings multiple of 41. Assuming Nvidia manages to achieve even $4.50 per share in earnings next year and trades at 40 times earnings at that time, its stock price could jump to $180. That would be a 30% jump from where the stock is right now, giving investors a solid reason to buy it even after the impressive gains that it has clocked this year.

The Newest Dow Growth Stocks Nvidia and Amazon Crushed the S&P 500 in 2024, but Which Is the Best Buy for 2025? | The Motley Fool

The storied Dow Jones Industrial Average (^DJI -0.28%) is one of the oldest and most reputable stock market indexes. The 30 Dow components are industry-leading blue chip stocks representing their respective stock market sectors. But the Dow has undergone major transformations over the last five years. The two latest changes came this year, with Amazon (AMZN 2.94%)replacing Walgreens Boots Alliance in February and Nvidia (NVDA -1.81%) replacing Intel in November. Amazon and Nvidia wasted no time proving their value in modernizing the Dow, with both components outperforming the S&P 500 (^GSPC 0.25%) and Dow indexes year to date. But investors care more about where a company is going than where it has been. Here's why Nvidia stands out as a better buy than Amazon for 2025, and some factors to consider when buying leading growth stocks at all-time highs. Before getting too far into our discussion, it's worth mentioning that Amazon's cloud computing arm, Amazon Web Services (AWS), is a major customer of Nvidia. So there's certainly a scenario where both companies thrive and post market-beating gains, or slowdowns at AWS trickle down to Nvidia. On Dec. 3, Nvidia announced that its latest tech, including its Blackwell architecture for generative artificial intelligence (AI), was coming to AWS. A new computing platform available through AWS Marketplace Private Offers will allow enterprises to build AI models with the support of Nvidia experts. AWS has developed liquid-to-chip cooling across its data centers with a new solution that offers air- and liquid-cooling capabilities for powerful AI supercomputer systems like the Nvidia GB200 NVL72. Nvidia is the undisputed leader in chips for hyperscalers, and AWS is the leading hyperscaler -- commanding roughly the same market share as Microsoft Cloud and Alphabet-owned Google Cloud combined. According to a Nov. 1 report from Synergy Research Group, AWS holds a 31% market share over the cloud market compared to 20% for Microsoft and 13% for Google. However, AWS doesn't have nearly the dominance in cloud as Nvidia does in chips for data centers. Over its history, Amazon has been a remarkably flexible company, branching into different end markets and enduring several periods of economic uncertainty. The company's network effects, leading cloud position, growing e-commerce business, and combination of diversification and disruption are valid reasons to buy Amazon stock like there's no tomorrow. AWS' operating income comprised 62% of Amazon's total operating income for the nine months ending Sept. 30, 2024. Compared to the same period last year, AWS revenue increased by $12.22 billion, but its operating expenses only increased by $479 million, so nearly all of that revenue gain translated to operating income growth. However, without the contribution from AWS, Amazon simply isn't growing very quickly. AWS has expanded Amazon far beyond e-commerce and made it a better business, but not in the same way that chips for data centers have been a game changer for Nvidia. In Nvidia's recent quarter, which was third-quarter fiscal 2025 (ended Oct. 27), Nvidia reported $30.77 billion in revenue consisting of $27.64 billion from compute and $3.13 billion from networking. Operating income from the compute and networking segment came in at $22.081 billion -- giving the segment a ridiculously high operating margin of 71.8%. For context, Amazon -- as a whole -- booked $17.41 billion in operating income in its recent quarter. And AWS' margins aren't nearly as high as Nvidia's. Nvidia's gaming and AI PC, professional visualization, and automotive and robotics segments combined for $4.22 billion in revenue. The graphics segment earned just $1.502 billion in operating income. It's hard to believe, but five years ago, Nvidia's data center business was smaller than its graphics segment. Whereas today, data center makes up over 85% of Nvidia's revenue and over 90% of its operating income. In the quarter, Nvidia said that cloud service providers made up around 50% of its data center revenue, while the remainder consisted of consumer internet and enterprise companies. These customers (like AWS) are some of the highest-quality customers in the world. They are the exact kind of customers Nvidia wants because they have the financial means to invest through market cycles. Nvidia went from a chip company for graphics to a chip company for data centers. In contrast, Amazon still does many different things, but the best part of its business is AWS. Nvidia has better margins and more growth potential. It has a more commanding market share. And it is a more pure-play investment thesis on data center growth, whereas Amazon's investment thesis crosses more industries and is more complex. Nvidia's biggest risks are a slowdown in AI capital spending or competition coming along and eroding margins. But so far, that hasn't happened. Nvidia has so far been an earnings-driven story. In fact, earnings growth has outpaced the growth in the stock price. Eventually, Nvidia's growth will probably slow down. But until that happens, it's hard to call Nvidia a bubble because the business is delivering real, bottom-line results. This isn't a company that has the potential to do amazing things in the future; rather, it is delivering unbelievable results right now. Because Nvidia has been an earnings-driven story, its valuation remains reasonable. Nvidia has a higher price-to-earnings (P/E) ratio and forward P/E ratio than Amazon. But as you can see in the chart, the gap between the valuations of both companies could narrow if Nvidia continues to grow its earnings at a faster pace. Nvidia and Amazon are excellent companies that stand to benefit from higher AI spending. However, competition or a cyclical slowdown could quickly make both companies look more expensive, leading to a steep sell-off. When buying industry-leading growth stocks at all-time highs, it's important to understand that the factors contributing to the record highs could be the same ones leading to a sell-off. Wall Street will waste no time downgrading a stock based solely on its near-term growth prospects. However, the good news is that individual investors don't have to get caught up in the noise and, instead, can focus on the long-term investment thesis. Investors interested in Nvidia should continue to monitor its pace of technological advancements and ability to monetize those improvements. Currently, Nvidia is out-innovating its competition, so it can still charge top dollar for its products. Furthermore, its customers are doing so well that they can afford to pay pretty much whatever Nvidia is charging. Nvidia is at the top of its game, and there has yet to be any concrete reason to believe it will change. But if the cycle does turn, there will be signs from Nvidia's top customers like AWS and Meta Platforms. The stock price continues to be driven by earnings growth, which should continue next year. In sum, Nvidia has a simpler and more effective business model than Amazon and much better growth, making it the better buy now.

Meet the Only 3 S&P 500 Stocks That Are Beating Nvidia This Year

Nvidia (NVDA 3.48%) is about to do it again. The chipmaker is only a few weeks away from delivering its fourth gain of over 100% in the last five years. In 2023, Nvidia reigned as the best-performing stock in the S&P 500 Index. Is a repeat performance coming? Probably not. Meet the only three S&P 500 stocks that are beating Nvidia this year. 1. Palantir Technologies Artificial intelligence (AI) and data analytics software company Palantir Technologies (PLTR -1.56%) is one of the newest members of the S&P 500, joining the prestigious index in September 2024. This newbie is now the best-performing stock in the S&P with a year-to-date gain of over 300%. That's well above Nvidia's gain of around 180%. Sure, Palantir's inclusion in the S&P 500 boosted its share price. However, the stock was already a huge winner thanks largely to its impressive growth. This momentum continued in the third quarter of 2024, with Palantir reporting its revenue jumped 30% year over year. CEO Alexander Karp said the strong performance was "driven by unrelenting AI demand that won't slow down." Palantir stock has especially taken off after the U.S. presidential election in November. The company is widely viewed as a likely winner in President-elect Trump's next administration. 2. Vistra Vistra (VST 4.64%) provides electricity in 20 states. Some investors might view utility stocks as boring. However, Vistra has been downright exciting in 2024 with its share price quadrupling year to date, lagging only slightly behind Palantir. One key secret to Vistra's recent success is the resurgence of the nuclear power industry. In 2023, roughly 7% of the company's power generation capacity came from nuclear power plants. Earlier this year, though, Vistra completed its acquisition of Energy Harbor, adding around 4,000 megawatts of nuclear generation capacity. Vistra has at least one thing in common with Nvidia: Both companies benefit from the soaring demand for AI. The data centers that run AI applications require tremendous amounts of electricity. Vistra finalized agreements in the third quarter of 2024 to provide power to Amazon in Texas and Microsoft in Illinois -- a sign of how important data centers have become to the company's business. 3. Texas Pacific Land Corp. Texas Pacific Land Corp. (TPL -11.59%) owns around 873,000 acres in Texas. Most of this land is in the Permian Basin, the highest-producing oil region in the U.S. TPL is enjoying a banner year in 2024, with its share price up over 190%. The company conducted a three-for-one stock split on March 18, 2024. However, this stock split wasn't a major factor in TPL's outstanding gains this year. The stock received an even bigger boost after the announcement that it would replace Integra Lifesciences Holdings in the S&P MidCap 400 in June. Only a few days ago, TPL was added to the S&P 500. Texas Pacific Land isn't an oil and gas producer, but the company makes money from royalties it receives from oil and gas producers. The "drill, baby, drill" approach of the incoming Trump administration could be positive for TPL. Most likely to beat Nvidia again in 2025? Which of these three stocks is most likely to beat Nvidia again in 2025? My pick is Vistra. I like Palantir's business prospects. However, like some Wall Street analysts, I'm concerned about its sky-high valuation. I also think Texas Pacific Land has solid prospects, but I don't have a warm-and-fuzzy feeling that the landowner will be able to outperform Nvidia next year. Vistra, on the other hand, could continue to benefit from AI data center growth and increasing interest in nuclear power. The stock's price-to-earnings-to-growth (PEG) ratio is a low 0.89, according to LSEG. I wouldn't bet the farm that Vistra will deliver a bigger gain than Nvidia will in 2025, but I suspect it's in the strongest position to do so among these three stocks.