This AI Stock Could Soar by 67% in 2025. Here's Why.

Artificial intelligence (AI) remains a major trend that shows no signs of slowing down. Investors should not shy away from this sector, even after a robust two years of growth. One leading company in AI investments is Nvidia (NASDAQ: NVDA). What sets Nvidia apart from many other AI stocks is its significant financial benefit from substantial investments made by prominent technology firms in AI infrastructure.

Hans Mosesmann, an analyst from Rosenblatt Securities, has set a price target of $220 per share for Nvidia. This valuation implies a potential 67% upside over the next year, a remarkable gain for a company of Nvidia's scale, and is very feasible provided certain conditions are met.

Nvidia's Superior GPUs

Nvidia distinguishes itself in the AI landscape through its ability to generate profits from AI activities. While major AI companies invest heavily in enhancing their computing capabilities to train AI models—hoping for long-term payoffs—Nvidia is benefiting from these substantial expenditures.

The company's graphics processing units (GPUs) and the accompanying software are top-tier, making them the preferred choice for businesses aiming to train AI models. GPUs are designed for parallel computing, allowing them to process multiple calculations at once, which enhances training efficiency. Furthermore, GPUs can be clustered to amplify processing power, which is why many leading AI firms are constructing server systems outfitted with thousands of GPUs to accelerate model training.

That said, the existing generation of GPUs is just the beginning. Nvidia's legacy Hopper architecture has already showcased impressive capabilities, but the upcoming Blackwell GPU architecture promises to deliver performance enhancements, allowing AI models to be trained up to four times faster than before—an essential upgrade for those seeking top-notch computational performance.

However, it’s worth noting that GPUs do not have the longest lifespan in data centers. They are under constant use, leading to quicker wear and tear. Reports from a data center expert at Alphabet suggest that GPUs typically last between one to three years. Consequently, many recently bought GPUs will likely need replacement soon. Add to this the ongoing demand for AI and the expansion of computing resources, and it's easy to see how Nvidia can continue its growth trajectory.

Nevertheless, Nvidia faces some challenges.

Increasing Competition in AI

Some recent developments may pose challenges for Nvidia in 2025, particularly the growing interest in utilizing CPUs for AI inference and the rise of custom AI accelerators. Although Nvidia's GPUs have established a reputation as some of the finest on the market, they consume considerable power and are not as efficient as CPUs for simpler tasks like AI inference (the phase where a trained model is applied). This means that for certain straightforward applications, cheaper and more efficient CPUs could replace the need for powerful, energy-consuming GPUs.

Moreover, many of Nvidia's major clients are working towards creating custom AI training accelerators. These bespoke chips would enable companies to eliminate Nvidia from the equation, bypassing the costs associated with accessing GPU-driven computational power. However, these custom solutions necessitate specific configuration of workloads for optimal functionality. For generalized AI modeling or preliminary training experiments, custom accelerators might not provide efficient alternatives.

While these challenges are notable, they appear relatively minor and are likely to impact only a segment of Nvidia’s overall business.

Nvidia's Stock Valuation and Growth Potential

So, how can Nvidia's stock potentially surge by 67% in 2025? The answer lies in the company's capability to meet expectations and maintain a positive forecast for the upcoming year.

Currently, Nvidia trades at approximately 52 times its trailing earnings, a valuation that hovers near its lowest levels in the past two years.

This pricing makes it hard to label Nvidia as "overvalued," especially compared to other tech giants like Apple and Amazon, which trade at 38 and 47 times earnings, respectively, despite experiencing slower growth rates.

Nvidia is projected to increase its revenue by 52% in fiscal year 2026 (ending January 2026). If the company can sustain its profit margins while its valuation holds steady or increases slightly, it's conceivable that Nvidia's stock could experience that anticipated 67% increase. Crucially, there should also be indications that fiscal year 2027 will be strong, as any signals of potential decline could lead to a significant drop in stock value.

Currently, Nvidia's valuation reflects expectations that are consistent with its business performance. Even though some investors may be selling off Nvidia shares to realize profits, considerable growth potential still exists, leading to the view that Nvidia remains a solid investment option after its recent pullback.

AI, Investment, Nvidia