Nvidia stock will soar in 2025. Here’s why.

After a blistering run since early 2023, Nvidia (NASDAQ: NVDA) hit a wall The stock is up 730% since the start of last year (at the time of this writing), but over the past three months, Nvidia is down about 4%.

A number of factors have influenced the stock. Fears of a potential slowdown in the adoption of generative artificial intelligence (AI), rumors of a delayed launch of Nvidia’s next-generation Blackwell platform, concerns about a decline in the company’s gross margin and an expensive valuation have some investors to fear that the stock might have taken it before them.

However, a quick look at the available evidence suggests that while these concerns are understandable, they are also largely unfounded. I think there’s still plenty of room for Nvidia to run, and I predict the stock will continue to hit new all-time highs through 2025. Here’s why.

A speed bump in AI adoption?

Accelerating adoption of artificial intelligence has helped boost tech stocks since the start of 2023, but investors have begun to question whether this breakneck pace could continue. There is evidence to suggest that it can.

To close the second calendar quarter, Alphabet, Microsoft, Amazonand Meta platforms all announced plans to increase capital expenditure (capex) for the rest of 2024, also showing plans for significant increases next year. The vast majority of this spending will go towards equipping the servers and data centers needed to support AI. Since these tech titans are Nvidia’s biggest customers, this suggests that the company’s growth streak has legs.

Stepping back and looking at the big picture can also provide context. Generative AI is expected to add between $2.6 trillion and $4.4 trillion to the global economy in the coming years, according to estimates provided by management consulting firm McKinsey & Company. This suggests that AI adoption will continue for the foreseeable future.

Blackwell is on the right track

In early August, reports surfaced that Nvidia’s next-generation Blackwell chips would be delayed by up to three months due to production issues. Stocks skidded on those reports as investors feared the worst.

When Nvidia released its quarterly results in late August, CFO Colette Kress dropped the issue:

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This suggests that the reported delays were much ado about nothing.

Fears of slowing growth are short-sighted

When Nvidia reported its fiscal second quarter 2025 results (ended July 28), there was a lot to like. The company delivered record quarterly revenue, record quarterly data center revenue and robust profits. However, there were two issues that investors seemed to focus on in Nvidia’s otherwise stellar results.

The first was the company’s gross margin, which fell from a register 78.4% in Q1 to 75.1% in Q2. During the earnings conference call, CFO Colette Kress noted that the culprits were a combination of product mix and inventory provisions related to the Blackwell launch.

That said, the company is forecasting gross margins for the rest of the year in the mid-70% range. Although it is below the record results of the first quarter, it is still long before of Nvidia’s 10-year average gross margin of 62%.

The other issue that seemed to spook some investors was Nvidia’s forecast for its fiscal third quarter, which ends at the end of October. The company is targeting record revenue of $32.5 billion, which would represent 79% growth. That would mark a deceleration from the triple-digit growth Nvidia delivered in each of the previous five quarters, but it’s still a remarkable performance.

Savvy investors knew the company’s growth rate would eventually slow, especially since Nvidia has been facing tough compounds since last year. That said, the company’s revenue growth is still exceptional and should be viewed in that context.

Not as expensive as you might think

One of the biggest problems plaguing Nvidia is the idea that the stock is exorbitantly expensive. That view is certainly understandable given that the stock currently sells for 57 times earnings, compared to a price-to-earnings ratio of 30 for S&P 500. However, investors willing to take a step back will see that Nvidia is not as expensive as it might seem at first glance.

A quick look at the stock chart shows that Nvidia is actually trading lightly below than the average P/E ratio over the last decade. It’s also worth noting that over the past 10 years, Nvidia stock has gained more than 25,000%, proof that the stock was — and continues to be — worth a premium.

However, a look ahead suggests the stock is even cheaper. Wall Street is forecasting earnings per share of $4.02 for the next fiscal year, which begins at the end of January. That means Nvidia is currently trading for less than 29 times forward earnings (as of this writing), which is a bargain, especially given the company’s continued growth prospects.

An objective view

Given the rally in Nvidia stock since the start of last year, it’s understandable that investors are taking a step back to survey the landscape. However, it is clear that the factors that have influenced the stock are much ado about nothing.

Nvidia’s biggest customers continue to spend heavily on its products, its next-generation platform is on track, its gross margin remains close to a record high, and its valuation isn’t as expensive as it first appears .

All of this suggests a clear path forward for Nvidia, and I predict the stock will continue to reach new highs through 2025.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, chief executive at Alphabet, is a member of the Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 Microsoft calls and short $405 January 2026 Microsoft calls. The Motley Fool has a disclosure policy.

Prediction: Nvidia stock will soar in 2025. Here’s why. was originally published by The Motley Fool