Nvidia’s stock has surged over 239% in 2023, and investors expect another year of strong growth in 2025. However, as the company’s data center business transitions to more advanced hardware for artificial intelligence (AI), concerns about slowing revenue growth and increased competition from AMD are emerging.
Key data points indicate a slowdown in revenue growth, with analysts projecting 51% growth in the coming fiscal year. The launch of Nvidia’s Blackwell platform, expected to ramp up in 2025, could surprise investors with its demand for high-performance computing tasks. However, this demand may already be reflected in analysts’ estimates.
Blackwell sales will face stiff competition from AMD’s Instinct data center GPUs, which posted strong growth last quarter. While Nvidia has the most robust supply chain, slowing growth and increased valuation could limit the stock’s gains. The current P/E ratio of 54 is consistent with previous five-year trading history but may be anchored to investors’ bullish expectations.
Wall Street analysts expect earnings to grow roughly in line with revenue next year at 50%. A potential drop in P/E multiple to 40 would put the share price at $177, implying upside of 28%. However, considering the increased competition and slowing growth, investors should approach Nvidia with caution. A long-term investment strategy may be more suitable than expecting monster returns.
Source: https://www.fool.com/investing/2024/12/16/nvidia-stock-growing-investors-expectations-2025