Nvidia’s stock has been a huge winner over the past two years, with surging gains of 238% in 2023 and an additional 164% this year. The company is well-positioned to continue its success in 2025 due to three key factors: insane demand for AI chips, a wide moat, and an inexpensive valuation.
The demand for Nvidia’s GPUs has skyrocketed as large tech companies like Microsoft, Alphabet, Amazon, and Meta Platforms invest heavily in AI infrastructure. These companies are racing to create the best and most powerful AI models, leading to an “insane” demand for Nvidia’s Blackwell GPUs. The company’s largest customers plan to spend more on building out data centers to support their AI ambitions, further fueling growth.
Nvidia has created a wide moat due to its CUDA software platform, which allows developers to program its chips for various tasks. This has made it the standard in the industry, and custom AI chips from companies like Broadcom are less efficient and more expensive. Nvidia’s array of AI-specific microservices and libraries through CUDA X also makes its chips more accessible.
The company’s valuation is also attractive, with a forward P/E ratio of 30 and a price/earnings-to-growth (PEG) ratio of approximately 0.95. This is undervalued compared to growth stocks, especially considering Nvidia’s projected 50% revenue growth in 2025. With AI still in its early innings, Nvidia has a wide moat that makes it well-positioned for continued success in the coming year.
Source: https://www.fool.com/investing/2024/12/22/is-nvidia-stock-a-buy