2 Massive Reasons to Buy Nvidia Stock Before 2025

Nvidia (NVDA -0.18%) The stock has once again delivered stunning returns in 2024 after a blistering performance last year, but a closer look at the company’s price chart will tell us that it has lost momentum over the past three months.

Shares of Nvidia were flat this time amid doubts about the company’s artificial intelligence (AI) outlook and its ability to continue delivering spectacular growth. Investors may be wondering if they should buy more shares of the semiconductor giant or start taking profits. However, it won’t be surprising to see Nvidia stock regain its mojo and deliver another stellar year in 2025.

In this article, we’ll check out some reasons why buying Nvidia stock before 2025 is a no-brainer.

Nvidia is expected to ship more AI chips next year

Analysts expect Nvidia to witness substantial growth in AI graphics processing unit (GPU) shipments in 2025. Market research firm TrendForce believes that Nvidia could see a 55% increase in AI GPU shipments next year, driven by the arrival of the company’s next-generation Blackwell processors.

TrendForce estimates that Blackwell will account for 80% of Nvidia’s AI GPU shipments next year. This also means that shipments of Nvidia’s older-generation Hopper chips will continue to remain solid into 2025. On the plus side, TrendForce isn’t alone in expecting a jump in Nvidia’s AI GPU sales next year .

Japanese investment bank Mizuho has raised its estimate for Nvidia’s AI GPU shipments for 2025 by 8% to 10%, compared to its previous estimate issued in July this year. Mizuho attributes this upward revision to an improvement in the company’s supply chain. Specifically, Nvidia’s foundry partner Taiwan Semiconductor Manufacturing (popularly known as TSMC) will reportedly double its advanced packaging capacity, which will allow the former to produce more AI GPUs.

Furthermore, TSMC plans to continue to increase its advanced packaging capacity beyond next year. The foundry giant believes it will be able to post at least a 60% annual growth rate in its chip-on-wafer-on-substrate (CoWoS) packaging capacity through 2026. This should put Nvidia in the a good position to capitalize on. the rapidly growing demand for AI chips.

Allied Market Research estimates that sales of AI chips could grow at an annual rate of 38% through 2032, generating annual revenues of $384 billion. Nvidia is the dominant player in the AI ​​chip market, with an estimated market share of between 70% and 95%, although a closer look at its AI revenue compared to that of its rivals will indicate that its share is likely at its lowest high level of that interval.

More importantly, TSMC’s improved manufacturing profile should ensure that Nvidia maintains its dominance in the AI ​​chip market. So higher sales of AI GPUs should translate into solid growth for Nvidia in the next fiscal year, while its pricing power in this market should lead to healthy growth in its bottom line as well.

NVDA revenue estimates for current fiscal year data by YCharts

Valuation should not be a concern given its growth potential

Some might point out that Nvidia is highly valued right now, with a price-to-earnings (P/E) ratio of 58, which is higher than Nasdaq-100 the average gain of the multiple index of 32. But, at the same time, Nvidia managed to justify its valuation with a remarkable growth. In fact, Nvidia’s earnings multiple is currently lower than its five-year average of 72.

Also, Nvidia’s price-to-earnings-growth ratio (PEG ratio) of just 0.14 means the stock is highly undervalued given the growth it’s expected to deliver.

NVDA PEG Ratio data by YCharts

The PEG ratio is a valuation measure that takes into account the potential earnings growth a company could deliver. A reading less than 1 means the said stock is undervalued. That’s why now would be a good time for investors to load up on Nvidia stock before the company’s potential jump in AI chip sales in 2025 sends it soaring.