Beginning in 2023, nvidia‘ (NVDA -3.12%Jeez The stock has gained an astronomical 906% as of the time of writing. It’s also right around its all-time high right now, but both of those facts may scare off some investors. The common thought is, “Nvidia is already so booming; how can it grow any further?”
This behavior is known as “price anchoring,” and it occurs when investors “anchor” their views on a previous price, and when a stock goes up, they now consider it expensive. . While this is common investor thinking, it has caused many (myself included) to miss a big chunk of Nvidia’s boom. However, I would argue that NVIDIA is not that expensive of a stock right now, especially when compared to its peers.
Although you’ve missed part of his prime, there’s still plenty of room to run.
NVIDIA is poised for strong growth again in 2025
NVIDIA’s success can be directly linked to one movement: artificial intelligence (AI). NVIDIA has capitalized on this trend as big AI spenders load up their computing servers with industry-leading NVIDIA GPUs. GPUs are a fantastic choice for this type of computing because they can process multiple calculations in parallel. They can also be connected in clusters to multiply this effect, and it’s not uncommon for AI hyperscalers to see servers with over 10,000 GPUs training AI models.
Although the early stages of the AI ​​computing buildout were massive, companies are planning to spend more this year. All cloud computing platforms have told investors that capex will increase in 2025 — a similar message that AI hyperscales. Meta platform Presented during its Q3 earnings release. Taiwan Semiconductorchip maker NVIDIA also predicts that AI-related chips will double their revenue in 2025, another clear indication that Nvidia’s growth is far from over.
Finally, let’s see what Wall Street analysts expect from NVIDIA. For fiscal 2026 (ends January 2026), an average of 60 analysts expect NVIDIA to generate revenue of $196 billion — up 52% ​​from where they think fiscal 2025 will end. This level of growth is unprecedented for a company of NVIDIA’s size and also indicates that NVIDIA’s growth story is far from over.
NVIDIA is going to have a monster 2025, but the stock isn’t trading high in preparation.
Nvidia is not as expensive as you might think
Because NVIDIA is expected to grow so much over the next year, using a trailing earnings metric can be problematic. Therefore, I will use a forward-looking measure to evaluate NVIDIA’s valuation.
At today’s prices, NVIDIA will trade at 33 times earnings at the end of fiscal 2026, if all the targets analysts have set are met. In other words, it will trade at 33 times 2026 expected earnings.
NVDA PE ratio By data ycharts.
It’s not that expensive, especially considering the companies apple And Microsoft Trade at 27 and 30 times FY2026 earnings, respectively.
However, if NVIDIA maintains its strong growth rate, its price level is unlikely to drop. As a result, the stock will rise throughout the year, giving investors the benefit of market-beating returns.
Although Nvidia has had a great run over the past two years, I think 2025 will be another strong year for the stock, though it likely won’t be as good as 2023 or 2024. Still, there’s plenty of growth left in the business. , which now makes it a solid buy.
Randy Zuckerberg, former director of market development and spokeswoman for Facebook and sister of MetaPlatforms CEO Mark Zuckerberg, is a member of Motley Fool’s board of directors. Keith Dury has positions in NVIDIA and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, MetaPlatforms, Microsoft, NVIDIA, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a Disclosure Policy.
