Nvidia (NVDA -5.29%) is a leading supplier of networking hardware and chips for gaming, computing, robotics, and especially data centers, which is where most artificial intelligence (AI) development takes place.
When Nvidia stock went public in 1999, the company had a market capitalization of around $500 million. It has grown to a staggering $3.5 trillion since then, with more than $3 trillion of that value created in the last two years alone, thanks to surging demand for its AI data center chips.
Nvidia stock is trading at $144.47 as of this writing, but there are two reasons I think it could soar to $200 (or more) during 2025. If I'm right, it will value the company at almost $4.9 trillion, and translate into a 38% return for investors.
Image source: Nvidia.
The first reason: A rapid ramp-up in Blackwell sales
Graphics processing units (GPUs) are more effective in AI workloads than traditional central processing units (CPUs). They are specifically designed for parallel processing, meaning they can handle several tasks at once without losing performance. This is key because AI development is extremely data intensive.
Nvidia's flagship H100 GPU was built on its Hopper architecture, and it helped the company win 98% of the entire market for AI data center chips in 2023. It was superseded by the H200 GPU, which started shipping in mid-2024, and offered almost twice the performance. But in 2024, Nvidia revealed an entirely new architecture called Blackwell, which promises an even bigger leap in performance.
The Blackwell-based GB200 NVL72 GPU system can perform AI inference a whopping 30 times faster than the equivalent H100 system. That performance is unleashed by Nvidia's fifth generation of NVLink networking technology, which allows GPUs to communicate with each other faster than ever. The GB200 NVL72 system is also 25 times more energy-efficient than the equivalent H100 infrastructure, which can save data center operators substantial amounts of money on electricity costs.
Nvidia shipped 13,000 sample GB200 GPUs to customers during its fiscal 2025 third quarter (ended Oct. 31, 2024). Demand is significantly higher than supply right now, so sales are likely to ramp up very quickly.
Morgan Stanley (which rates Nvidia stock as a top pick for 2025) forecasted that Nvidia would ship around 450,000 GB200 GPUs in the final three months of calendar 2024, followed by up to 800,000 in the first three months of 2025. Other analysts think Blackwell will scale a little more slowly, but they remain very optimistic about its potential this year.
Blackwell revenue might even surpass Hopper revenue by April, which really highlights how fast Nvidia's business can transform.
Nvidia's fiscal year 2025 will wrap up at the end of this month. It's on track to deliver a record $128.6 billion in total revenue, representing 112% growth compared to fiscal 2024. If recent quarters are anything to go by, around 88% of the company's total revenue for the year will come from the data center segment, led by GPU sales.
That's a big shift from just three years ago in fiscal 2022, when the data center segment made up just 39% of its total business.
The second reason: Nvidia stock trades at an attractive valuation
Nvidia is operating with very high profit margins right now because GPU demand far exceeds supply, which gives the company pricing power. That's why its earnings per share more than tripled (year over year) over the last four quarters, to $2.62.
Using that figure, Nvidia stock currently trades at a price-to-earnings (P/E) ratio of 56.8, which is actually a discount to its 10-year average of 58.9. In other words, despite surging more than 800% over the last two years alone, Nvidia stock might still be cheap.
The picture is even more attractive when looking to the future. Wall Street's consensus forecast (provided by Yahoo) suggests that Nvidia could generate $4.43 in earnings per share during fiscal 2026 (which starts next month), placing the stock at a forward P/E ratio of just 32.6:
NVDA PE Ratio data by YCharts.
That implies that Nvidia stock would have to soar by 80% over the next 12 months just to trade in line with its 10-year average P/E ratio, which translates into a price of $260!
However, midway through this year, Wall Street will start looking ahead to Nvidia's potential results for fiscal 2027. If its incredible run of growth appears likely to stall, investors might hesitate to send the stock as high as $260.
It's simply too early to know what will happen at this stage, especially because competition will almost certainly ramp up in the coming year.
For now, I think $200 is a realistic target for Nvidia stock during calendar 2025. It implies a P/E ratio of 45.5 at the end of the year, assuming Wall Street's earnings forecast proves accurate. It's a big enough discount to the stock's 10-year average P/E that investors will probably still find it attractively valued.
