Nvidia (NASDAQ: NVDA) roared higher last year, gaining more than 170%, and emerged as the key player in the artificial intelligence (AI) boom. This is because the tech giant sells the world's top performing AI chips as well as a wide range of related products and services to accompany customers throughout their AI stories. Nvidia chief Jensen Huang even called the company the "on-ramp" to AI during an interview a few months ago on the BG2Pod podcast.
All of this is a particularly big deal considering the potential of AI to revolutionize many industries and supercharge the earnings of companies involved in the development of AI and those that use AI to improve their businesses. Today's $200 billion AI market is forecast to reach more than $1 trillion by the end of the decade.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
Nvidia is well positioned to benefit over the long term and in the near term. In fact, my prediction is this hot stock won't take a pause this year and instead will soar in 2025 -- thanks to this one thing. Let's check it out.
Image source: Getty Images.
DeepSeek news and Nvidia
First, though, it’s important to address news that hurt Nvidia stock early this week. Chinese startup DeepSeek launched a large language model, saying development took only two months and at a price tag of less than $6 million. This weighed on AI stocks, including Nvidia, as it called into question the massive investments poured into the technology. The concern was U.S. AI customers, seeing DeepSeek successfully train its LLM with less powerful chips, may think twice before buying Nvidia’s most expensive GPUs.
But it’s also possible that just the opposite will happen, and with this advance by DeepSeek, U.S. companies will truly commit to using the top GPUs to ensure their leadership. In any case, I don’t see this news as something that will hurt Nvidia’s growth prospects. Now, let’s take a quick look at the path Nvidia has traveled so far.
This tech giant started out as a designer of graphics processing units (GPUs) that mainly served the video games industry. But the GPU's ability to process multiple tasks at once made it a great tool for many other sectors -- so Nvidia created a parallel computing platform, CUDA, that helped the GPU's usage explode across the marketplace.
And as the AI boom gained momentum, it was clear Nvidia's GPUs would play a major role. The company's earnings reports confirmed this, as revenue climbed quarter after quarter in recent years in the double- and triple-digits to reach records well into the billions of dollars. In the most recent quarter, Nvidia reported revenue of more than $35 billion. Importantly, Nvidia not only has generated revenue growth, but this is coupled with extremely strong profitability on sales -- gross margin has remained above 70% over the past year.
Now, let's move along to my prediction. Some investors have worried that after Nvidia's stellar stock performance over the past two years -- gaining 800% over that period -- the stock may be due for a pause. And that could have been the scenario if Nvidia rested on its laurels and just continued selling its current products.
But Nvidia isn't standing still. This market powerhouse is launching its new Blackwell architecture right now and next-generation architecture, Rubin, may not be far behind. News reports, including one in Taiwan Economic Daily, suggest the Rubin release might happen by the middle of this year -- sooner than expected as it was originally planned for 2026.
Nvidia's innovation
My prediction is this innovation -- these two launches -- will push Nvidia stock higher this year. For a couple of reasons. Such major product releases show that Huang was serious when he said the company would update its GPUs on an annual basis and could turn this promise into a reality. Annual updates make it very difficult for rivals to catch up and unseat Nvidia, and this offers us reason to be confident about growth over the long term.
The release of two major products this year also will produce something concrete that we can see right away, and that's revenue. The company already said Blackwell will generate several billion dollars in revenue in the fiscal fourth quarter -- a period that closes at the end of this month -- and gross margin will remain above 70%. So Nvidia's new releases may boost revenue right away, and at a high level of profitability. If upcoming earnings reports confirm this, investors could continue piling into this top player.
Finally, trading at 40 times forward earnings estimates, Nvidia isn't dirt cheap, but it does have room to run -- especially in light of its growth and profitability profile.
Considering all of this, my prediction is Nvidia's top performance won't stop here and should continue in 2025. And the good news is, even if I'm wrong about that, this market leader still has what it takes to potentially supercharge your portfolio over time.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $874,051!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of January 27, 2025
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 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.
