Nvidia (NASDAQ: NVDA) is having quite the run in 2024. It entered the year trading for roughly a split-adjusted $50 but has rocketed all the way up to around $130. Now, the question is, could Nvidia reach $150 before 2025 arrives to secure a second consecutive year of its stock price tripling?
It doesn’t have far to go, but there are still many trading days left before the end of 2024, which could bring some surprises.
GPUs are a key piece of AI
Nvidia’s incredible rise has been directly tied to the artificial intelligence (AI) race. Many companies are trying to develop a leading AI model for its platform and other service providers (like the cloud computing giants) are increasing computing power by purchasing more Nvidia graphics processing units (GPUs).
GPUs are suited for this task because of their ability to process multiple calculations in parallel. Combine that aspect with being able to connect thousands of GPUs in clusters, and you have the ability to process intense AI workloads very quickly.
These GPUs aren’t cheap, either. One of the more popular Nvidia GPUs is the H100, which is estimated to cost around $25,000 apiece. So, when you see articles about companies that employ 10,000 GPUs, like Tesla‘s Dojo computer, it’s safe to assume that it cost around $300 million by the time other items in the systems are accounted for.
But GPUs aren’t a subscription service, so Nvidia needs to continue selling more GPUs to grow. One factor that could help Nvidia grow is its new GPU architecture, Blackwell. Blackwell offers massive advantages over the previous generation, Hopper. It consumes less energy and can run calculations much faster than Hopper. This could spur some customers to upgrade their existing hardware, which could be a catalyst for further growth.
Blackwell’s launch has been pushed back a few times and is currently scheduled to start ramping up production during the fourth quarter of 2024. We’ll get an update when Nvidia announces its Q3 of fiscal year 2025 earnings sometime in late November; that update could be what the stock needs to reach $150 before 2024 is up.
Investors are betting that Nvidia’s earnings will massively increase over the next year
There are a lot of high expectations baked into Nvidia’s stock. Right now, it trades for 48.6 times forward earnings, which is a pretty big premium.
NVDA PE Ratio (Forward) data by YCharts
Most companies don’t trade at this level for long unless they can sustain rapid growth. Instead, they either meet expectations, and their valuation slowly declines, or they fail to meet those lofty goals, and investors dump the stock. Then, the valuation comes down because the stock price declined.
So far, Nvidia has been able to meet the lofty expectations the market has attached to its stock, but it must continue doing that throughout 2025 and beyond to deliver the returns shareholders have been accustomed to.
But the question is, could Nvidia rise to $150 before the year is up? I think it’s possible with how much excitement there has been centered around AI, especially if Nvidia’s Q3 fiscal-year 2025 (ending in late October 2024) is strong. We won’t know those results until the end of November. There’s also an election between now and those results being available, and the market could react strongly in one way or another depending on the outcome, or it may do nothing.
If you look into the future, there are many unknowns, but one thing that seems certain is that we’re only at the start of AI integration. We’ll need more GPUs in the future to fully maximize AI’s capability, so if Nvidia can’t hit $150 this year, I’m positive it will likely hit it sometime in 2025.
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Keithen Drury has positions in Tesla. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.