This investor favourite has been on an epic run over the previous couple of years and reveals no indicators of slowing.
The Nasdaq Composite has been on hearth over the previous couple of years, pushed larger by the appearance of synthetic intelligence (AI), enhancing financial situations, an uncontested election, and the Federal Reserve Financial institution’s latest strikes to chop rates of interest. After returning 43% in 2023, the tech-centric index is up roughly 30% in 2024. Historical past suggests the rally will seemingly proceed into 2025.
The present bull market started on Oct. 12, 2022, and whereas each rally is totally different, historical past can present necessary context. Bull markets final greater than 5 years, on common. For the reason that present rally simply entered its third yr, there is a sturdy probability the Nasdaq will proceed to achieve floor subsequent yr. It is also value noting that the Nasdaq has generated features 73% of the time, relationship again 53 years, so historical past is on the facet of traders. Lastly, the Nasdaq has jumped 12%, on common, in years following optimistic features, which suggests there’s extra upside forward.
Moreover, there’s been a resurgence within the recognition of inventory splits over the previous few years. Consequently, traders are taking a renewed curiosity in corporations that break up their shares, as that is traditionally preceded by years of strong gross sales and revenue progress. One such firm is Nvidia (NVDA -1.81%). The inventory has gained 26,920% over the previous decade (as of this writing), prompting administration to provoke a 10-for-1 inventory break up earlier this yr — after a 4-for-1 break up in 2021.
Regardless of its latest run-up, there’s cause to imagine that Nvidia’s progress spurt will proceed into 2025. Learn on to search out out why.
Picture supply: Getty Photographs.
Underpinning the AI revolution
The adoption of generative AI has unfold like wildfire over the previous two years as companies are desirous to share within the productiveness will increase promised by these superior algorithms. Generative AI has confirmed adept at drafting and summarizing emails, looking and abbreviating content material, mining information, producing authentic content material, and writing pc code — and new functions are being found each day. Automating and streamlining duties saves customers money and time, driving new customers to undertake AI.
Nvidia pioneered the graphics processing models (GPUs) that make this all attainable. These specialised chips present the sheer number-crunching functionality that introduced AI to life. The key lies in parallel processing or breaking apart computer-intensive jobs into smaller, extra manageable bits. Nvidia first developed these chips to render lifelike pictures in video video games however quickly found different functions for this breakthrough know-how, together with information facilities, high-performance computing (HPC), and machine studying — an earlier department of AI.
The overwhelming majority of AI processing is finished within the cloud and in information facilities, one other issue that straight advantages Nvidia. The corporate controls as a lot as 98% of the info middle GPU market, in keeping with semiconductor analyst agency TechInsights. As evidenced by its entrenched place, Nvidia has turn into the gold commonplace for AI processing.
There’s all the time discuss of ramping up competitors, however to this point, Nvidia stays the king of the hill.
Paint by numbers
To know the magnitude of Nvidia’s rise, a take a look at its monetary outcomes is so as. After producing triple-digit gross sales and revenue features final yr, the corporate’s spectacular win streak continues. Throughout its fiscal 2025 third quarter (ended Oct. 27), Nvidia delivered report income of $35.1 billion, up 94% yr over yr. It additionally delivered earnings per share (EPS) of $0.78, up 111%. For context, the corporate generated extra gross sales in a single quarter than it produced for all of fiscal 2022.
The largest contributor to its success was the corporate’s information middle section, which incorporates cloud computing, information middle, and AI chips, and grew 112% yr over yr to $30.8 billion.
Wall Road expects Nvidia’s progress streak to proceed. For its fiscal 2026 (which begins in late January), consensus estimates are calling for income of $195 billion, which might symbolize a year-over-year improve of 51%. Nonetheless, the best estimate clocks in at greater than $269 billion, which might symbolize progress of greater than 100%. Wall Road is infamous for underestimating Nvidia’s progress, so the fact is probably going someplace in between.
The long run’s so vivid, I gotta put on shades
Nvidia will start delivery its next-generation Blackwell platform later this yr, and by all accounts, the corporate has one other market chief on its palms. Financial institution of America analyst Vivek Arya contends that traders proceed to underestimate the magnitude of the demand for Blackwell, which he believes can be outselling Nvidia’s Hopper chips inside two to 3 quarters. There’s additionally an enormous disconnect between Nvidia’s addressable market and the way traders understand it:
They are surely a system integrator at this level. They’re promoting full racks with all of the computing, the networking, the optical assets, the reminiscence, every little thing thrown in. That’s the reason the income monetization alternative is a lot higher [than investors appreciate].
The analyst goes on to say that Nvidia bundles its software program with these myriad techniques. All these alternatives, taken collectively, assist illustrate why Nvidia’s addressable market continues to develop.
But, for all that chance — and regardless of its 183% features to date this yr — Nvidia continues to be attractively priced. Wall Road believes Nvidia will generate EPS of $4.42 in fiscal 2026 (which begins in January). Meaning the inventory is presently promoting for roughly 32 occasions ahead earnings (as of this writing), which is remarkably low cost in mild of the chance.
If I may purchase only one stock-split inventory heading into 2025, it must be Nvidia.
