Nvidia(NASDAQ: NVDA) was the best performing stock of the whole S&P500(SNPINDEX: ^GSPC) in 2023, ending the year with a 239% gain. Year to date in 2024, the index is up another 181%, but that’s not enough to lead the index; the first place is currently occupied by Vistra Corp.
However, a gain of 181% is enough to put Nvidia above any other company valued at $1 trillion or more.
NVDA graph
Nvidia’s incredible performance comes amid rising demand for its data center graphics processing units (GPUs), which are the top choice among artificial intelligence (AI) model developers.
The company is about to ship its next generation AI GPUs based on the latest Blackwell architecture, which will reset the benchmark for the entire industry. Nvidia CEO Jensen Huang says demand for Blackwell is already “insane,” and I predict this new hardware will be the reason the stock will once again outperform the rest of the billion-dollar club in 2025.
Nvidia’s H100 GPU set the benchmark for AI training and inference. The chip went into production at the end of 2022 and was the best choice for data center operators such as Microsoft(NASDAQ: MSFT), Amazon(NASDAQ: AMZN)And Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL).
Nvidia has since released the H200 GPU, which can perform AI inference at almost twice the speed of the H100. But Blackwell-based GPU systems like the GB200 NVL72 are capable of running AI inference at as much as 30 times the speed of equivalent H100 setups.
Additionally, Huang says that individual GB200 GPUs will sell for $30,000 to $40,000 each, which is about the same price many data center operators paid for the H100 when it hit the market. In other words, Blackwell will offer a substantial increase in cost efficiency. That means the largest and most advanced AI models will become financially accessible to a greater number of developers and companies.
In an interview with CNBC in early October, Huang said demand for Blackwell GPUs is “insane.” According to one analyst, Nvidia could ship up to 200,000 GB200 units in the last quarter of 2024, followed by as many as 550,000 units in the first quarter of 2025. That could translate into as much as $30 billion in data center revenue over the next few years. two quarters of that one chip alone!
Nvidia’s fiscal year differs from the traditional calendar year. The company is currently in fiscal year 2025, which ends on January 31, 2025 (three months from now). That will mark the start of the 2026 fiscal year.
Wall Street’s consensus estimate (according to Yahoo) suggests that Nvidia will generate total revenue of $125.6 billion in fiscal 2025, representing a 125% increase over fiscal 2024. The company is expected to follow with revenues of $179.2 billion in fiscal year 2026. .
The data center segment will be responsible for most of that growth. It accounted for 87% of Nvidia’s total revenue during the second quarter of 2025 (which ended July 28), reaching a record $26.3 billion – up a whopping 154% from the same period a year ago.
The incredible demand for Blackwell should drive more record results in the coming quarters. Microsoft is rumored to be one of the biggest buyers of the new GPUs. During fiscal year 2024 (which ended June 30), Microsoft spent a whopping $55.7 billion on capital expenditures, most of which went to its AI data center infrastructure and chips. The company has already stated that it will spend even more in fiscal year 2025.
Amazon is also on track to spend more than $60 billion on AI infrastructure by 2024 Metaplatforms has told investors it will spend up to $40 billion. These numbers are likely to rise even further in 2025.
Image source: Nvidia.
Nvidia’s dominant market share in the data center GPU space has given the company an incredible amount of pricing power, driving a huge profit boost. The company generated $54.9 billion in net income over the past four quarters, which translated into $2.21 in earnings per share (EPS).
Based on that EPS figure and Nvidia’s current share price of $139.56, the company trades at a price-to-earnings (P/E) ratio of 63.1. That’s not cheap at first glance – in fact, it’s almost double the price/earnings ratio of 32.1 of the Nasdaq-100 technology index.
However, Wall Street expects Nvidia to generate earnings per share of $4.06 in fiscal 2026, bringing its forward price-to-earnings ratio to 34.3. That can be far too cheap for two reasons.
First, Nvidia’s stock has traded at an average price-to-earnings ratio of 58.2 over the past decade, regularly above 50 even before the AI revolution took hold of Wall Street.
NVDA PE Ratio Chart
Second, as the 2026 fiscal year progresses, analysts will begin publishing their forecasts for the 2027 fiscal year. If Nvidia is likely to deliver incredible revenue and earnings growth again, investors may be willing to pay a much higher price-to-earnings ratio for its stock. In other words, 34.3 may be far too attractive to pass up.
So if Wall Street’s EPS forecast for fiscal 2026 is accurate, and if Nvidia trades in line with its 10-year average price-to-earnings ratio, that means its shares could rise 70% or more over the course of next year .
There is no other company in the billion-dollar club that is coming close to the forecast revenue or profit growth for next year. That’s why I think Nvidia is the obvious choice to outperform.
Huang believes data center operators will spend $1 trillion building AI infrastructure over the next five years, and if he’s right, Nvidia’s incredible performance could extend well beyond 2025.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Prediction: This Will Be the Best Performing Stock in the $1 Trillion Club by 2025 Originally published by The Motley Fool
