The Nasdaq Composite (NASDAQINDEX: ^IXIC) advanced 29% in 2024, and history says that momentum could spill into 2025. Since its inception in 1971, the Nasdaq has gained over 20% in 20 years. Following those incidents, the technology-focused index returned an average of 16% in the next year.
In other words, history says the Nasdaq could advance 16% in 2025, but most Wall Street analysts see even more upside in Nvidia (NASDAQ: NVDA) and Lam Research (NASDAQ: LRCX), two companies that reset their soaring share prices by completing 10-for-1 stock splits in 2024.
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- Of the 66 analysts who follow Nvidia, 92% have a buy rating on the stock and the rest recommend holding. The median target is $175 per share, implying 17% upside from the current share price of $149.
- Of the 34 analysts who follow Lam Research, 65% rate the stock a buy and the rest recommend holding. The median target price is $95 per share, implying 27% upside from its current share price of $75.
Here's what investors should know about Nvidia and Lam Research.
1. Nvidia
Nvidia develops accelerated computing solutions that span hardware and software. The company is best known for its graphics processing units (GPUs), chips that accelerate a variety of complex workloads, from rendering visual media to training machine learning models to scientific simulation.
Nvidia GPUs are the industry standard in data center accelerator chips, especially where artificial intelligence (AI) is concerned. But the company also provides central processing units (CPUs) and networking equipment. That vertical integration lets it build data center systems with a superior total cost of ownership, according to CEO Jensen Huang.
Importantly, Nvidia has also created an ecosystem of software development tools called CUDA, as well as subscription software products built atop its CUDA platform. Those tools streamline the development of artificial intelligence applications across use cases ranging from recommender systems to autonomous vehicles. No competitor offers anything so comprehensive.
In short, Nvidia should be a major beneficiary as data centers transition from general-purpose computing to accelerated computing, which includes the growing demand for AI infrastructure. Spending on data center accelerators is projected to increase at 24% annually through 2030, according to Grand View Research.
Wall Street expects Nvidia's adjusted earnings to increase 50% over the next four quarters. That consensus estimate makes the current valuation of 57 times adjusted earnings look relatively cheap. Patient investors should feel comfortable buying a small position today.
2. Lam Research
Lam Research develops wafer fabrication equipment (WFE), which refers to the machinery and tools that semiconductor manufactures need to turn silicon wafers into chips. Specifically, the company provides technologies that address three market verticals: deposition, etch, and clean.
Deposition products apply a thin electric layer to silicon that will eventually form the conductivity pathways needed for semiconductors to function. Etch products selectively remove material added during deposition to create circuit patterns. And clean products remove unwanted materials from the wafers between other steps in the process.
Lam is the leader in etch equipment, and it ranks second in deposition equipment behind Applied Materials, according to William Kerwin at Morningstar. That scale is an important competitive advantage in the capital-intensive WFE industry. It supports the heavy R&D spending required to keep the company on the cutting edge of semiconductor manufacturing equipment.
In summary, Lam Research should benefit as the world becomes increasingly dependent on semiconductors, which is inevitable given the growing demand for artificial intelligence infrastructure. And Lam is unlikely to lose much market share because very few companies have the expertise and capital required to produce chip-manufacturing equipment.
With that in mind, Wall Street expects Lam's earnings to increase 15% in the next four quarters. That makes the current valuation of 24 times earnings look reasonable. Investors should feel comfortable buying a small position in this stock today.
Don’t miss this second chance at a potentially lucrative opportunity
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On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,385!*
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- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $474,140!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of January 6, 2025
Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Applied Materials, Lam Research, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
