Nvidia (NASDAQ: NVDA) stocks performed fantastically in the short and long term. Shares of the artificial intelligence (AI) tech giant are up 121% so far this year through May 31. Over the past decade, shares have risen 24,140%, turning a $1,000 investment into more than $242,000. These gains have crushed the market, as the S&P500 The index returned 11.3% and 230% respectively in these periods.
At some point, Nvidia stock won’t be able to maintain its current phenomenal performance. However, the company – and therefore its shares – still has strong growth potential, at least in the short term. Below are my predictions for the company and its stock a year from now, or late May/early June 2025.
1. Jensen Huang will still be the CEO
Nvidia co-founder and CEO Jensen Huang turned 61 earlier this year, according to public data, so he’s certainly young enough to continue in his role for a while, assuming he stays healthy. It’s clear from Nvidia’s quarterly earnings calls and interviews with Huang that he is not only brilliant, but also passionate about his work.
2. Nvidia’s GPUs will still dominate the data center AI chip market
Nvidia’s graphics processing units (GPUs) currently dominate the fast-growing data center chip market to accelerate the processing of AI workloads, including for training and inference. (Inferring involves deploying or running an AI application.) It is widely estimated that Nvidia’s GPUs have more than 90% of the GPU AI chip market for data centers, and at least 80% of the total AI chip market for data centers.
The growth of the market for AI chips in data centers increased dramatically in early 2023 due to the demand for technology that enables generative AI. This is the technology that powers the ChatGPT chatbot.
Nvidia will still have major control over this market in my opinion a year from now. Advanced micro devices (AMD) and Intelboth of which are relative newcomers to the GPU AI chip market for data centers, may grab a small market share, but they won’t make a significant dent in Nvidia’s dominance.
Why? Because Nvidia has a high moat around this company. It stems from the company’s significant lead in this market, which has led to “more than 4.7 million developers worldwide using CUDA and our other software tools to help deploy our technology in our target markets,” Nvidia said in its annual report for the fiscal year 2024, issued in 2024. February. Using CUDA, developers program Nvidia’s GPUs to significantly accelerate general-purpose and AI computing.
3. And Nvidia’s stock price in a year?
First, a word of caution: macroeconomic factors can affect the stock price of any company. These include economic slowdowns or recessions, which can cause the stock market to enter a bear market. Even the expectation of a recession can sink the stock market if the expectation is widespread.
That said, I think Nvidia stock could reach at least $1,700 per share within a year. assuming the US economy remains at least in a minimal growth mode and the stock market remains at least mildly bullish. This price target would represent a gain of at least 55% from the stock’s closing price on Friday of $1,096.33.
As background to my calculation, Wall Street analysts have been doing that for many years consistently And considerable underestimated Nvidia’s earnings growth potential. As a group they are getting better, but their profit expectations are still remarkably low. For Nvidia’s most recent four quarters, analysts’ consensus earnings expectations turned out to be too low by an average of more than 17%. The exact percentages as of the most recent quarter were 9.5%, 11.4%, 19.3% and 29.2%.
Given this dynamic, it makes sense to me to raise Wall Street’s earnings expectations to develop a price target. Of course, we don’t know how many analysts will deviate from this in the future. So the best we can probably do is assume that they will decline by about 17% over the next year, as they did last year.
The current price-to-earnings (P/E) ratio of Nvidia stock is 40.6. I assumed that this ratio will be the same in a year. But I raised Wall Street’s expected earnings per share (EPS) for the next fiscal year by 17% from $35.66 to $41.72. If you multiply 40.6 by $41.72, you get $1,694. That’s close enough to $1,700 to round up.
This calculation should be considered rough. A lot could happen in a year with Nvidia, the competitive environment and the macroeconomic environment. So don’t put much value in my (or anyone else’s) one-year price target. What I do have a lot of confidence in, however, is that Nvidia stock will outperform the market in the coming year.
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Beth McKenna has positions at Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Where will Nvidia stock be in 1 year? was originally published by The Motley Fool
