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Semiconductor giant Nvidia (NVDA) has been hitting new market-cap milestones at an unprecedented pace. Last year, it joined the $1 trillion market cap club, while its valuation surpassed $2 trillion in February this year. By June, it was a $3 trillion behemoth, becoming only the third company ever to achieve that feat.
Nvidia’s rally – both in percentage and absolute terms – looks like a Cinderella story. In the process, the chip-designing giant's market cap even rose above that of Apple (AAPL), which would have been unthinkable just a few years back.
NVDA was the best-performing S&P 500 Index ($SPX) constituent last year, with gains of nearly 240%. This year’s performance has been “modest” by that standard, but the chip stock is still up by a cool 179% for 2024, and is among the top five S&P 500 Index gainers YTD.
In this article, we’ll examine NVDA’s 2025 forecast - but before that, let’s examine why the stock has pulled back from its highs.
Why is Nvidia Stock Going Down?
Nvidia shares have fallen under their own weight, and despite beating estimates in its fiscal Q3 2025 earnings report, the stock still closed in the red after the results last month. We saw similar price action in NVDA following its fiscal Q2 earnings release, as well.
As has usually been the case with Nvidia, markets start to price in an expected earnings beat well ahead of the confessional, so the actual reported beat fails to enthuse investors, unless it is really significant. Simply put, “great not good" is what markets expect from Nvidia after its breathtaking rally.
However, given Nvidia’s size – its revenues are expected to be around $130 billion this fiscal year – large-scale beats of the kind it delivered in the past have become tough to achieve, at least in percentage terms.
There have also been apprehensions over how President-elect Trump’s tariff agenda could impact Nvidia. The company’s supply chain is concentrated in Taiwan, while China remains one of its key markets, despite U.S. export restrictions on high-end artificial intelligence (AI) chips to the communist country.
Then there are intermittent concerns over the sustainability of Nvidia’s growth, and on a related note, its valuations. Also, fears of competitors catching up with Nvidia remain a potent risk.
Will NVDA Stock Go Back Up?
Those following Nvidia over the last two years will attest to the fact that the stock tends to take a breather after every rally, and then embarks on the next leg of its uptrend. Usually, the best time to buy Nvidia has been during these periods of weakness, when the stock trades sideways with a negative bias.
While NVDA stock fell after the company released its fiscal Q3 earnings, it was difficult to find shortcomings in the report. As Wedbush analyst and long-time Nvidia bull Dan Ives said, the earnings were “flawless” and “should be framed and hung in the Louvre.”
Notably, during the earnings call Nvidia said that it now expects sales of its next-gen Blackwell chips to be higher than what it previously envisioned.
Nvidia Stock Price Prediction 2025
After Nvidia’s fiscal Q3 earnings release, multiple brokerages raised the stock’s target price. Sell-side analysts remain as bullish as ever on NVDA stock, and 39 of the 43 analysts in coverage rate it as either a “Strong Buy” or a “Moderate Buy.” The remaining 4 analysts rate NVDA as a “Hold” and there are no “Sell” ratings.
Nvidia’s mean target price of $173.06 is 25% higher than Friday’s closing prices, and would imply its market cap surpassing $4 trillion over the next 12 months. If Nvidia stock were to reach its Street-high target price of $220, its market cap would be well north of $5 trillion.
Can Nvidia Become a $5 Trillion Company?
There has been no stopping the AI euphoria, and the continued AI spending by companies – both big and small – has kept Nvidia’s cash registers ringing. The Jensen Huang-led company’s revenues more than doubled in the last fiscal year, and while growth has come off those highs, its sales are expected to double this fiscal year as well. For the next fiscal year, analysts are modeling 51% revenue growth - which is not low by any standards, and is the highest growth that’s expected out of any Big Tech company.
While Nvidia expects some pressure on its gross margins in the short term as Blackwell sales ramp up, management expects margins to increase subsequently, and CFO Colette Kress said margins should rise to mid-70s “pretty quickly.”
Looking at the long-term picture, Bank of America expects revenues for Nvidia’s Data Center segment to rise above $300 billion by the end of this decade. The segment sells AI chips, and is by far the company’s biggest segment, having long since dwarfed the revenues of its formerly dominant Gaming segment.
NVDA shares don’t look that pricey, at a next 12-months (NTM) price-to-earnings (PE) multiple of 35x. Nvidia has a lot of growth runaway ahead, and the stock still has room to run higher from these levels.
Meanwhile, despite all the euphoria over AI, not many companies have been able to monetize the technology significantly, even amid huge spending. This, in my view, remains the biggest risk to Nvidia's growth story, as tech companies’ failure to monetize AI investments could mean that they eventually face shareholder wrath to cut AI capex, which would hurt Nvidia’s revenues.
