This high-flying stock could keep soaring in 2025 following tremendous gains this year.
The S&P 500 index has recorded impressive gains of nearly 27% so far this year as of this writing, and it recently breached the 6,000 level for the first time. The good news for investors is that the index is expected to move even higher in 2025.
According to analysts at RBC Capital Markets and Barclays, the S&P 500 could hit 6,600 by the end of 2025. That would be an increase of over 9% from current levels. There are other, more optimistic forecasts as well. Yardeni Research and Deutsche Bank, for instance, expect the index to hit 7,000 by the end of next year, while BMO Capital Markets has a target of 6,700.
Further drops in inflation and strong growth in the technology sector are two factors expected to positively affect the S&P 500 next year. That’s why now’s a good time to take a closer look at one S&P 500 component that has delivered impressive gains in 2024 and could replicate its performance next year as well — Nvidia (NVDA 3.48%).
Nvidia could turn in another solid performance next year
Shares of Nvidia have handsomely outperformed the S&P 500 index this year, with stellar gains of 180% as of this writing. Though the stock has been under pressure of late following the release of its fiscal 2025 third-quarter results (for the three months ended Oct. 27), it may not be long before it renews its upward trajectory.
The company generated $91.1 billion in revenue in the first nine months of the fiscal year, a massive jump of 135% over the same period last year. Meanwhile, Nvidia’s non-GAAP net income has jumped to $2.10 per share from $0.78 per share in the same quarter last year. The company’s fiscal fourth-quarter guidance of $37.5 billion suggests it could end fiscal 2025 with a top line of just under $129 billion. Consensus estimates project that Nvidia will end the fiscal year with $2.95 in earnings per share (EPS).
As the following chart tells us, Nvidia is expected to maintain its impressive growth momentum next year as well.
NVDA EPS Estimates for Current Fiscal Year data by YCharts.
However, don’t be surprised to see Nvidia’s revenue and earnings growing at a faster pace than what Wall Street is projecting. That’s because the company saw “staggering” demand for its latest Blackwell artificial intelligence (AI) graphics processing units (GPUs), which are used by major cloud companies for AI training and inference.
Morgan Stanley recently reported that Nvidia sold out its capacity of Blackwell chips for the next 12 months. The company’s growth next year will only be limited by the number of chips that it can manufacture, considering the outstanding demand. As a result, the company is working aggressively to increase the output of its Blackwell processors to fill as much demand as possible.
Taiwan-based daily newspaper DigiTimes reports that Nvidia has secured 60% of the advanced chip packaging capacity of its foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM), popularly known as TSMC. It’s worth noting that TSMC plans to more than double its advanced packaging capacity next year to meet the surging AI chip demand from the likes of Nvidia.
Other reports indicate that TSMC could ramp up its capacity at an even faster pace, taking its advanced chip packaging capacity from 36,000 units per month currently to 90,000 units next year. What’s more, TSMC could increase this monthly output to 130,000 units in 2026.
All this bodes well for Nvidia, given that the demand for AI chips is forecast to increase at an annual rate of 29% through 2032. This should pave the way for the company to keep growing at an incredible pace in 2025 and beyond.
More stock price upside could be in the cards
We saw in the chart above that Nvidia’s earnings could jump to $4.41 per share in the next fiscal year. However, that estimate has been heading higher as the chart indicates. More specifically, consensus estimates were expecting Nvidia to deliver $3.83 per share in earnings for fiscal 2026 three months ago. Turn the clock back by 30 days, and the bottom-line forecast for next year was at $4.03 per share.
There’s a good chance that Nvidia’s earnings estimate for fiscal 2026 could head higher, thanks to the healthy demand for its chips and the potential improvement in the supply chain. The market could reward its improved earnings power with more upside, which is why it makes sense to buy Nvidia right now. It’s trading at 32 times forward earnings, a discount to its five-year average forward earnings multiple of 41.
Assuming Nvidia manages to achieve even $4.50 per share in earnings next year and trades at 40 times earnings at that time, its stock price could jump to $180. That would be a 30% jump from where the stock is right now, giving investors a solid reason to buy it even after the impressive gains that it has clocked this year.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
