The Nasdaq Composite has been on fire over the past several years, fueled by the advent of Artificial Intelligence (AI), improving economic conditions, an uncontested election, and the Federal Reserve Bank’s recent interest rate cut. After returning 43% in 2023, the tech-centric index rose as much as 30% in 2024. History shows that the rally will likely continue until 2025.
The current bull market began on October 12, 2022, and while every rally is different, history can provide important context. Bull markets last more than five years, on average. As the current rally just entered its third year, there is a strong possibility that the Nasdaq will continue to gain next year. It is also important to note that the Nasdaq has yielded 73% of the time, since 53 years, so history is on the side of investors. Finally, the Nasdaq has jumped 12%, on average, in the years following positive gains, which suggests that there is some upside ahead.
Missing the Morning Scoop? Wake up with Morning news in your inbox every market day. Sign Up For Free »
Additionally, there has been a resurgence in the popularity of stock splits in the past few years. As a result, investors are taking renewed interest in companies that split their shares, as these are often driven by years of strong sales and profit growth. One such company Nvidia(NASDAQ: NVDA). The stock has gained 26,920% over the past 10 years (as of this writing), prompting management to initiate a 10-for-1 split early this year — after a 4-for-1 split in 2021.
Despite the rush, there is reason to believe that Nvidia’s growth will continue in 2025. Read on to see why.
Image source: Getty Images.
The adoption of artificial intelligence has spread like wildfire in the past two years as businesses want to share in the productivity gains promised by these advanced algorithms. Generative AI has proven adept at writing and summarizing emails, searching and summarizing content, mining data, creating original content, and writing computer code — and new applications are being discovered every day. Automating and streamlining tasks saves users time and money, driving new users to adopt AI.
Nvidia pioneered graphics processing units (GPUs) that make all of this possible. These unique chips provide sheer number-crunching capabilities that brought AI to life. The secret is in parallel processing or breaking down computer tasks into smaller, manageable pieces. Nvidia first developed these chips to provide lifelike images in video games but soon found other applications for this technology development, including data centers, high-performance computing (HPC), and machine learning – the first branch of AI.
The majority of AI processing is done in the cloud and in data centers, something that directly benefits Nvidia. The company controls nearly 98% of the data center GPU market, according to semiconductor analyst firm TechInsights. As evidenced by its entrenched position, Nvidia has become the gold standard for AI processing.
There is always talk of increasing competition, but so far, Nvidia remains the king of the hill.
To understand the magnitude of Nvidia’s rise, take a look at its financial results below. After generating triple-digit sales and profits last year, the company’s impressive winning streak continues. During its fiscal 2025 third quarter (ended Oct. 27), Nvidia delivered a record revenue of 35.1 billion, up 94% year-on-year. It also delivered earnings per share (EPS) of $0.78, up 111%. For the record, the company generated more sales in the quarter than it produced everything fiscal year 2022.
The main contributor to its success was the company’s data center segment, which includes cloud computing, data center, and AI chips, and grew 112% year-on-year to $30.8 billion.
Wall Street expects Nvidia’s growth to continue. For its 2026 fiscal year (which begins at the end of January), consensus estimates are calling for revenue of $195 billion, representing a year-on-year increase of 51%. However, the highest estimate clocks in at more than $269 billion, which represents a growth of more than 100%. Wall Street is known for underestimating Nvidia’s growth, so the truth may be somewhere in the middle.
Nvidia will begin shipping its next-generation Blackwell platform later this year, and by all accounts, the company has another market leader on its hands. Bank of America analyst Vivek Arya argues that investors continue to underestimate the size of Blackwell’s demand, which he believes will outsell Nvidia’s Hopper chips by two to three quarters. There’s also a big disconnect between Nvidia’s market cap and how investors see it:
They actually integrate the system at this point. They are selling complete racks with all the computing, networking, optical resources, memory, everything thrown in. That is why the money making opportunity is so great. [than investors appreciate].
The analyst goes on to say that Nvidia bundles its software with these multiple systems. All these opportunities, taken together, help to show why Nvidia’s fixed market continues to grow.
But, for all that potential — and even though it’s gained 183% so far this year — Nvidia is still attractively priced. Wall Street believes Nvidia will generate EPS of $442 million in fiscal 2026 (which starts in January). This means that the stock is selling for 32 cents (as of this writing), which is very cheap in light of the opportunity.
If I could buy one single-dividend stock leading into 2025, it would have to be Nvidia.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor A team of researchers just found what they believe to be true 10 good stocks for investors to buy now… and Nvidia was not one of them. The 10 stocks shorted could produce monster returns in the coming years.
Think about when Nvidia entered this list on April 15, 2005… if you deposited $1,000 during our promotion, you will have $872,947!*
Stock Advisor provides investors with an easy-to-follow plan for success, including guidance on portfolio construction, regular updates from analysts, and two new stock picks every month. TheStock Advisorservice has four times as much return of the S&P 500 since 2002*.
See 10 stocks »
*Stock Advisor returns from December 2, 2024
Bank of America is a marketing partner of Motley Fool Money. Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool has a disclosure policy.
History Says Nasdaq Will Increase in 2025. 1 Stock-Split Stock Buying Before It Happens. first published by The Motley Fool
