The past few years have been a non-stop thrill ride Nvidia(NASDAQ: NVDA) investors. The company had a market capitalization of just $359 billion at the start of 2023. Now its value has risen to more than $3.35 trillion (at the time of writing) – a more than ninefold increase in less than two years.
The driving force behind this parabolic move is the company’s graphics processing units (GPUs), which quickly became the gold standard for powering artificial intelligence (AI). This has resulted in sales increasing by 480% since the beginning of 2023 and net income increasing by 1,270%.
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Investors shouldn’t expect growth of that magnitude to continue, but there’s plenty of evidence that Nvidia still has plenty of fuel in the tank. Many of the world’s largest tech companies continue to invest heavily to upgrade their infrastructure to handle the rigors of AI — and for most of them, that means stockpiling Nvidia’s state-of-the-art processors.
Beyond the obvious secular tailwind, there’s a crucial detail that investors may be overlooking that could mean a big move for Nvidia in 2025. Read on to find out why.
Image source: Getty Images.
For Nvidia’s third quarter 2025 (ended October 27), revenue of $35.1 billion rose 94% year over year, while adjusted earnings per share (EPS) of $0.81 rose 103%. The results were well above management’s forecast, which called for 79% revenue growth.
Management was clear about what fueled the impressive display. “The age of AI is in full force, driving a global shift to Nvidia computing,” said CEO Jensen Huang.
Looking at the results, the revenue increase was driven by continued strong demand within Nvidia’s data center segment, which grew 112% year over year to $30.8 billion. Much of that revenue came from the company’s Hopper architecture, the basis for the H200 Tensor Core GPU, and the GH200 Grace Hopper Superchip – which currently powers much of the world’s data centers and AI infrastructure.
While these processors currently set the benchmark, they are about to be supplanted by Nvidia’s Blackwell architecture, which represents the next generation of its AI-centric chips.
The company has been working to ramp up production of the Blackwell processors and has previously said it expects to ship “several billion dollars” of these chips in the fourth quarter of 2025, which ends in late January.
Nvidia isn’t worried about robust demand, with major tech companies vying to be among the first to receive these next-generation AI-focused chips. In an interview with CNBC, Huang said the demand for Blackwell was “crazy.” He went on to say, “Everyone wants to have the most, and everyone wants to be first.”
With everyone wanting to get their hands on these chips, supply is currently exceeding demand, and this situation is expected to take several quarters to resolve. During the earnings call, chief financial officer Colette Kress said: “Demand for Blackwell is enormous, and we are rushing to scale up supply to meet the incredible demand.” In her written commentary, she added (emphasis mine): “Both Hopper and Blackwell systems have certain supply limitations, and the Demand for Blackwell is expected to exceed supply for several quarters in fiscal 2026.” For context, Nvidia’s 2026 fiscal year begins in late January.
The resulting pent-up demand could act as a springboard for Nvidia’s sales into next year.
I’m not the only one who thinks this way. Beth Kindig, CEO and chief technology analyst for the I/O Fund, believes that by 2025, sales of Blackwell processors will surpass sales of Nvidia’s GPUs for 2023 and 2024 — combined. Kindig says the company’s unbridled pricing power could drive at least 50% growth in its data center segment next year. That could lead to as much as 70% upside potential for the stock in 2025.
This race is on to increase the availability of its flagship processor, as Nvidia works with its suppliers to ramp up production. As supply of these next-gen processors increases, the company’s revenues will also increase, as increased production means more chips available to sell. This will in turn boost already robust earnings, fueling a rise in the stock price.
To be clear: we don’t know precisely when supply constraints will ease, but Nvidia has a vested interest in resolving the bottleneck as quickly as possible. Management has historically been conservative with its estimates, so we can do that too probably expects a gradual increase in supply of these top chips, which will be the catalyst for Blackwell’s sales to ramp up as the year progresses.
Some investors have resigned themselves to the fact that Nvidia’s growth has already peaked. I believe this view is premature and represents an opportunity for astute investors with a longer-term view. The premium valuation has already started to relax. Wall Street predicts the company will generate earnings per share of $4.41 in fiscal 2026, which is just 31 times next year’s revenue (at the time of writing).
The evidence suggests that sometime in 2025, supply of Nvidia’s top Blackwell AI chips will increase, causing a corresponding increase in sales. I predict this will be the catalyst that fuels the stock price, sending it soaring in 2025.
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Danny Vena has positions at Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Prediction: Nvidia stock will rise in 2025. Here’s why. was originally published by The Motley Fool
