The AI giant NVIDIA has written an impressive success story in recent years. But will the boom continue in 2025? That speaks for it.
• Strong prospects for success for NVIDIA shares in 2025 too
• Demand for new AI chips could further fuel the price
• Technological innovations promote growth
NVIDIA has established itself as one of the biggest beneficiaries of the AI boom in recent years. Now that the stock is one of the best stocks in the S&P 500 with its impressive performance, the question now arises: Can NVIDIA continue this success in 2025? Many experts answer with a resounding yes – and for several compelling reasons.
NVIDIA shares soaring: Leading role in artificial intelligence
A central argument for NVIDIA’s soaring in 2025 is the company’s dominant position in the field of artificial intelligence (AI). In particular, NVIDIA’s GPUs (graphics processors) are indispensable for modern AI models. Forrester Research, led by Mike Gualtieri, writes according to Fool.com: “Without NVIDIA’s GPUs, modern AI would not be possible.” This is partly due to the company’s unique software infrastructure, known as CUDA, and partly due to the performance of NVIDIA GPUs in AI training and inference tasks, which consistently outperforms rival AI chips. While competitors offer their own chips, they lack the advanced software tools that developers need. NVIDIA’s CUDA ecosystem, built over nearly two decades, makes the company’s GPUs far more valuable to developers, contributing to its market dominance.
The huge demand for these processors could continue in the coming years, which would continue to make NVIDIA a leader in the AI space. According to Grand View Research, the AI sector is a market with spending expected to grow 36 percent annually through 2030.
Blackwell chips: “NVIDIA’s most successful product” drives shares up
Another important factor in NVIDIA’s expected success in 2025 is the introduction of the Blackwell GPU. This new processor architecture promises up to four times faster AI training and 30 times faster inference tasks compared to NVIDIA’s previous Hopper architecture. The demand for the Blackwell GPU is astonishing, as the company has announced several times. The chip has already been sold out for twelve months. Unit costs range between $30,000 and $40,000 and are highly sought after by tech giants such as Google, OpenAI and Microsoft. NVIDIA’s CEO Jensen Huang even said at Computex 2024 in Taipei that the Blackwell GPU will be “probably the most successful product in the company’s history.”
Stable margins, share buybacks and surprisingly cheap valuation
Despite a slight decline in gross margin from 78.4 percent in the first quarter of 2024 to 74.6 percent in the third quarter, NVIDIA remains extremely profitable. NVIDIA CFO Colette Kress said Blackwell’s gross margin is expected to be in the mid-70 percent range after the production increase, according to Reuters. This means that the gross margin could possibly fall slightly in the coming quarters, but should stabilize again afterwards.
In addition, a possible reduction in the corporate tax rate, as proposed by US President-elect Donald Trump, could further strengthen the company. Excess capital could then be returned to shareholders through share buybacks and dividends. NVIDIA has already repurchased $26 billion worth of shares between June 2023 and June 2024, and a lower tax rate could encourage the company to invest even more in share buybacks, which could accelerate earnings growth and send the stock higher.
NVIDIA stock posted a price-to-earnings-growth (PEG) ratio of just over one at the end of 2024. In general, PEG ratios below one are considered favorable, while values between one and two are considered affordable. In this context, NVIDIA stock is remarkably cheap at the end of 2024 at around $135, positioning the stock for above-average returns in 2025.
Investors are betting on NVIDIA shares – the stock market darling of 2025?
With a strong market position in artificial intelligence, the introduction of the Blackwell GPU and a unique software ecosystem, NVIDIA appears well prepared to continue growing in 2025. Even as competition increases, the company could remain a leader thanks to its technological advantages and the advancing demand for powerful AI chips. Time will tell whether NVIDIA remains the stock market darling for investors betting on the future of AI.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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