This year has been one of milestones for top tech company Nvidia (NVDA -2.95%). The artificial intelligence (AI) chip leader delivered record earnings quarter after quarter as demand for its products and services soared. Thanks to a triple-digit share price gain, the company even temporarily became the largest by market value -- surpassing Apple. Nvidia also won a spot among the elite, with an invitation to join the Dow Jones Industrial Average, and the stock became the best performer on the benchmark for the year.
It's clear that this AI powerhouse has been firing on all cylinders. But the string of milestones isn't over. The company just reached yet another one, worth about $30 billion and showing exactly how important this stock is to investors right now. Let's take a closer look and consider whether Nvidia stock is a buy for 2025.
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The GPU is a natural for AI
First, though, a quick summary of the Nvidia story so far. The company makes the world's top-performing graphics processing units (GPUs), a type of chip that mainly powered video games in its earlier days. But the GPU's ability to process many tasks at once made it a natural for other areas too. That's how and why the GPU expanded into AI. In fact, this chip plays a central role in crucial AI tasks -- such as the training and inferencing of large language models.
As a result, Nvidia's revenue has exploded higher in recent years. For example, in the latest quarter, revenue came in at a record of more than $35 billion -- higher than a full year of revenue just two years ago. Importantly, the company is also highly profitable on sales, with a gross margin of more than 70% in recent quarters.
Nvidia even expects gross margin to remain above 70% during the launch of its Blackwell architecture. This illustrates the strength of the company's cost structure -- because launches, involving new logistics and manufacturing processes, generally weigh on profit.
As mentioned above, this tech giant has reached milestone after milestone over the past year, and now it's finishing up 2024 with yet another one. Nvidia is on its way to becoming the most-bought security by retail investors this year. Retail investor purchases represented nearly $30 billion in net inflows into Nvidia as of Dec. 17, according to Vanda Research. Last year, Nvidia was only the No. 4 most-purchased stock, with about $11 billion in inflows, and Tesla took the top spot. The data also show that net inflows from retail investors into Nvidia have increased by nine-fold from 2021.
So, regular investors like you and me have piled into Nvidia in recent times, and the company has become a key part of many portfolios. But does Nvidia have what it takes to continue being an investor favorite, and is the stock a buy for 2025?
Nvidia's valuation
Nvidia's popularity among investors has driven valuation higher. Today, the stock trades for 47x forward earnings estimates, around its most expensive level this year. Still, it's not a ridiculously high level for a growth stock, especially one operating in a dynamic industry that's in the early days of its story. Nvidia CEO Jensen Huang says that about $1 trillion in outdated computers operate in the world today, and they'll need to be updated for accelerated computing. This suggests that a lot more growth could be ahead for Nvidia over the long term.
Something big is happening in the near term that could continue pushing Nvidia stock higher. As mentioned, Nvidia is launching Blackwell, a move that's already started with a production ramp during this current quarter. Blackwell is a fully customizable system, with seven different chips, various networking options and more -- and its performance could be a game-changer for users.
Speaking of users, they've been lining up to get in on Blackwell for quite some time, with demand reaching "insane" levels, as Huang said during a CNBC interview this fall. Nvidia even says it expects several billion dollars in Blackwell revenue during this first quarter of commercialization.
All this means that Nvidia, even after its gains this year, has what it takes to continue attracting retail investors and landing at the top of their investing lists. This popularity doesn't make the stock a buy -- but other elements do. Nvidia's market leadership, its focus on innovation, and the launch of Blackwell could drive this stock higher in the weeks and months to come, making it a top stock to add to your portfolio for 2025.
