Nvidia's Share Price Might Double by 2025 Due to Various Factors
Over the past two years, investors in Nvidia (NVDA -2.09%) have experienced unprecedented success, with shares doubling in both 2023 and 2024. This remarkable surge has seen the company's value increase by 860% since the beginning of last year, primarily due to the impact of artificial intelligence (AI) on its revenue and earnings.
Back in December 2023, I outlined why Nvidia's shares could potentially double by 2024. The driving factors at the time included the strong demand for its graphics processing units (GPUs) for AI model training and inference, as well as the efforts being made by its manufacturing partner, Taiwan Semiconductor Manufacturing (NYSE: TSM), to boost supply.
This article aims to delve into Nvidia's potential catalysts for 2025, exploring reasons why the semiconductor giant could once again experience significant growth in the new year.
Positive trends shaping 2025
Nvidia's latest GPUs, based on its cutting-edge Blackwell architecture, are expected to be the primary growth drivers in 2025. During its November earnings conference call, management confirmed that these chips are in full production and are being shipped to customers. Revenue generated by Blackwell-related products should exceed expectations in the current quarter, thanks to improving supply chain conditions and high demand.
The demand for Nvidia's GPUs is currently outstripping supply, which bodes well for the company going forward. Market researcher IDC projects that Taiwan Semiconductor Manufacturing (TSMC) will double its chip-on-wafer-on-substrate (CoWoS) advanced packaging capacity to 660,000 wafers to meet demand in 2025, with Nvidia accounting for an estimated 60% of TSMC's CoWoS capacity for the year. This increased production capacity should allow Nvidia to significantly increase the output of its Blackwell processors, helping to reduce waiting times and fulfill more orders.
According to analysts at Morgan Stanley, Blackwell GPUs have already sold out for the next 12 months, based on a report from Tom's Hardware. As TSMC's production capacity increases, this waiting period is likely to decrease, enabling Nvidia to satisfy more orders and generate a substantial increase in data center revenue. Morgan Stanley expects the company to ship between 60,000 and 70,000 Blackwell B200 server systems in 2025, suggesting that these systems could contribute between $120 billion to $210 billion in revenue for Nvidia next year, or $165 billion at the midpoint.
Analysts are optimistic about Nvidia's growth potential, with estimates suggesting that the company could generate $195 billion in revenue in fiscal 2026 (which coincides with 11 months of calendar 2025), representing a 51% increase from the current fiscal year's projected revenue of $129 billion. With the potential revenue from Blackwell sales and Nvidia's commitment to selling its previous-generation Hopper chips, the company could surpass market expectations and set the stage for another round of stock price growth.
Potential reasons for doubling growth in 2025
Analysts expect Nvidia's earnings to increase by 50% in the next fiscal year to an average of $4.43 per share. This growth rate exceeds the expected 12% growth for the S&P 500 index, with the high earnings estimate for Nvidia standing at $6.11 for 2025.
Nvidia's impressive revenue growth and pricing power in the AI chip market could result in stronger growth than analysts' expectations in 2025. If the company manages to achieve $5 per share in earnings next year, trading at a 55 times earnings multiple (in line with its trailing earnings multiple), its stock price could reach $275. This represents almost double its current value.
I believe that Nvidia will maintain its elevated valuation following its impressive growth, as investors may reward the company with a premium multiple due to its potential to outperform the S&P 500's earnings growth by a significant margin. Therefore, investors should consider holding Nvidia in their portfolios, as its growth potential appears set to continue into the new year.
In light of this analysis, individuals interested in finance and investing might consider allocating some of their money towards Nvidia stocks, given the analysts' predictions of a potential 50% increase in earnings in the next fiscal year. Furthermore, the strong demand for Nvidia's Blackwell GPUs, coupled with Taiwan Semiconductor Manufacturing's plans to double its CoWoS advanced packaging capacity, could potentially drive significant growth in Nvidia's data center revenue in 2025.
