Nvidia's Stock Prediction: Aiming for $175 by 2025

Nvidia's stock has been riding a wave of momentum, and forecasts suggest that this may continue into the coming year.

Recently, reports have indicated that the U.S. government might establish limits on the export of advanced artificial intelligence (AI) chips to certain countries in the Middle East. Additionally, ASML, a key player in semiconductor manufacturing equipment, has reduced its guidance for 2025. These developments have been perceived as negative news for Nvidia (NVDA 0.78%).

But is the significant growth of Nvidia coming to a halt? Contrary to that notion, there is a strong belief that Nvidia's share price could climb to $175 by 2025.

Reasons for a 30% Price Increase

To reach the target of $175 next year, Nvidia’s stock would need to increase by about 30%. This gain appears achievable for a few reasons.

First, the transition to accelerated computing seems inevitable. This trend is likely to outweigh any detrimental effects from export restrictions on AI chips targeted at certain Middle Eastern nations. In the first half of 2024, only a small 6.5% of Nvidia's revenue came from regions outside the U.S., Singapore, Taiwan, and China, with revenue from the Middle East comprising just a fraction of that percentage.

Regarding ASML's downgraded outlook, it is suspected that it relates more to an oversupply in chip manufacturing rather than a decrease in chip demand. The slowdown in chipmaking equipment does not necessarily imply that chip demand itself will decline.

Second, Nvidia is set to release its new Blackwell GPU platform, which has elicited tremendous demand. According to Nvidia’s CEO Jensen Huang, the demand is “insane.” Meetings with Nvidia's management by Morgan Stanley revealed that Blackwell GPUs are already sold out for the next year.

Huang mentioned previously that Blackwell might become the most successful product in Nvidia's history, and this could be true. As Nvidia begins reporting sales numbers for Blackwell in the upcoming quarters, one can expect the stock price to rise.

Third, Nvidia is likely to introduce its next generation of AI chips next year. Even if these chips do not begin shipping until the end of 2025 or early 2026, the anticipation surrounding these advancements could serve as a positive catalyst for the stock.

Wall Street's Skepticism

However, it's important to note that many analysts on Wall Street currently hold a more cautious stance. The average price target for Nvidia over the next 12 months suggests only about a 10% upside.

Of the 38 analysts surveyed by financial data provider LSEG in October, 15 categorized Nvidia as a “hold,” and some even recommended selling the stock. This stands in contrast to September, when 55 out of 60 analysts rated Nvidia as a “buy” or “strong buy.”

A recognizable pattern emerges with Wall Street's recommendations and price forecasts for Nvidia. Typically, the consensus remains moderately optimistic until the company releases its next set of quarterly results. Following that, analysts often scramble to revise their estimates upward.

It is anticipated that this trend will continue into 2025. As Nvidia reveals its sales figures for Blackwell, it is likely that the average price target for the stock will be adjusted upwards, potentially hitting the predicted level of $175.

Potential Risks to Watch

Of course, the prediction comes with its own set of risks. What could potentially derail this forecast? Various factors could contribute to this including:

The U.S. economy could face challenges. A rise in global tensions may negatively impact Nvidia's business. Additionally, major cloud service providers might decide to reduce their investments in GPUs, shift their spending toward Nvidia's competitors, or even rely more heavily on their proprietary AI chips.

While these risks are acknowledged, the case for Nvidia reaching a share price of $175 next year remains strong. Nevertheless, how long it stays at or above that level is an open question.

Note: The author has no financial interest in the stocks mentioned. Links to relevant companies have been provided where applicable.

Nvidia, Stocks, AI