Expectations for the Nasdaq in 2025: A Look at Nvidia

The Nasdaq Composite has experienced significant growth over the past couple of years, driven by advancements in artificial intelligence (AI), improved economic conditions, a smooth election cycle, and recent interest rate cuts by the Federal Reserve. In 2023, the tech-focused index returned a remarkable 43%, and it has continued to rise with around a 30% increase in 2024. Historical data suggests that this upward trend is likely to persist into 2025.

The current bull market began on October 12, 2022. While each market rally varies, history offers useful insights. On average, bull markets last over five years. Since this rally is entering its third year, it shows promising potential for continued growth in the upcoming year. Historically, the Nasdaq has posted gains 73% of the time over the past 53 years, giving investors a favorable outlook. Additionally, the Nasdaq has historically averaged a 12% increase in years following strong positive performance, indicating more upside potential.

Recently, there has been a noticeable trend of stock splits, which have garnered renewed interest from investors. This interest typically precedes periods of strong sales and profit growth. One notable stock benefiting from this trend is Nvidia (NVDA). Over the past decade, Nvidia's shares have skyrocketed by an astonishing 26,920%. Earlier this year, the company executed a 10-for-1 stock split, following a 4-for-1 split in 2021.

Despite its impressive price increase, Nvidia's growth momentum appears likely to continue into 2025. Here's why Nvidia stands out as a strong investment opportunity.

The Role of AI in Nvidia's Growth

The rapid adoption of generative AI technology over the past two years has fueled significant demand across various sectors. Businesses are keen to tap into the productivity gains offered by these advanced algorithms, which are capable of drafting emails, summarizing content, mining data, creating original works, and writing code—among other tasks. The efficiency and cost-effectiveness of AI solutions have made them increasingly attractive to users.

Nvidia has been at the forefront of this AI revolution, having pioneered the development of graphics processing units (GPUs) essential for AI capabilities. These specialized chips allow for parallel processing, breaking complex tasks into smaller, manageable components, which can be processed concurrently. Originally designed for video game graphics, these GPUs have found applications in data centers, high-performance computing (HPC), and machine learning.

Nvidia’s dominance in the data center GPU market is striking, with estimates indicating the company holds up to 98% of this sector, as confirmed by semiconductor analyst firm TechInsights. Although discussions about escalating competition often arise, Nvidia currently maintains a robust position in the industry.

Nvidia's Financial Performance

To appreciate the scale of Nvidia's success, one must examine its financial results. Following triple-digit sales and profit growth last year, Nvidia reported record revenue of $35.1 billion in its fiscal 2025 third quarter (ending October 27), marking a year-over-year increase of 94%. Its earnings per share (EPS) also demonstrated impressive growth, up 111% to $0.78. For perspective, Nvidia earned more revenue in this single quarter than it did for the entirety of fiscal 2022.

The company’s data center segment—which includes AI chips, cloud computing, and data center solutions—was a significant factor in this success, expanding by 112% year-over-year to reach $30.8 billion in sales.

Wall Street analysts predict Nvidia’s growth will continue into the next fiscal year. For fiscal 2026, which starts in late January, the consensus revenue projection is approximately $195 billion, a noteworthy 51% increase from the previous year. Some estimates anticipate revenue exceeding $269 billion—a more than 100% growth. However, historically, Wall Street tends to underestimate Nvidia’s growth, indicating that actual results may be higher than expected.

A Bright Future for Nvidia

Nvidia plans to launch its next-generation Blackwell platform later this year, reinforcing its leading market position. Analyst Vivek Arya of Bank of America suggests that demand for Blackwell may significantly outpace Nvidia’s current Hopper chips, possibly within the next two to three quarters. Furthermore, there is a distinct gap between Nvidia’s actual addressable market and investor perception of it. The company has evolved into a system integrator, offering complete solutions that combine computing, networking, and memory resources. This transition broadens Nvidia's revenue opportunities more than investors typically realize.

Nvidia also pairs its hardware offerings with comprehensive software solutions, further enhancing its market presence. These factors collectively illustrate why Nvidia’s potential market and growth trajectory remain expansive.

Despite its remarkable 183% gain this year, Nvidia's current stock valuation of about 32 times forecasted earnings for fiscal 2026 suggests it is still attractively priced given the vast opportunities ahead.

If there's one stock-split stock to consider before entering 2025, it would undoubtedly be Nvidia.

Nasdaq, AI, Nvidia