Nvidia Secures Top Spot Amongst Market Cap Titans in 2024; Sustains Dominance Prospects in 2025?
In theory, a company's size shouldn't dictate its potential return on investment. However, in the real world, the market's titans often offer the most lucrative returns. Take, for instance, Nvidia (NVDA), which transformed from a $360 billion giant at the end of 2022 to a $3.4 trillion behemoth following two years of triple-digit gains.
Currently, Apple, valued at $3.7 trillion, holds the crown as the market's biggest company. Nvidia trails behind in second place, followed by Microsoft in third, according to our research. Despite this, a stock's size isn't as significant as its potential for growth. So, where does Nvidia stand in this regard?
Nvidia's success stems from its emphasis on artificial intelligence (AI). Although renowned for graphics cards used in gaming, design, illustration, automotive, and robotic applications, the company's most lucrative segment is AI data centers. Accounting for more than 80% of its revenue, data center sales skyrocketed by over 100% in the latest quarter, generating $30.8 billion.
Triple-digit growth is hard to sustain, and analysts expect a reduction to 112% for Nvidia's fiscal 2025. Revenue is projected to rise by 52% in the following year. Prices for the stock are already astronomically high, with a trailing per-share profit multiple of over 50 and an estimate of 30 for fiscal 2026. This might deter potential buyers due to the frothy valuation.
However, skeptics could be overlooking two crucial factors. First, the AI revolution is far from reaching its conclusion. It's arguably still in its early stages, giving hardware providers like Nvidia, which supplies the majority of AI data center processors, significant growth potential.
Second, Nvidia's stock valuation is not unusual for this ticker. The trailing 12-month P/E ratio has averaged above 80 in the past five years. The vast majority of analysts still consider Nvidia shares a buy, giving the stock a consensus price target of $174.60, a 25% increase from the current price.
None of this guarantees Nvidia will top the charts as the market's top-performing stock in 2025. But with its strong top and bottom-line growth prospects, coupled with its significant influence on AI technology, Nvidia maintains a solid foundation for continued market dominance. The key lies in its ability to leverage the sustained demand for AI computing in this rapidly evolving sector.
Investors interested in diversifying their portfolio might consider allocating some money towards Nvidia, given its impressive growth in the AI sector. Despite the stock's high valuation, the continued evolution and potential of AI technology make investing in Nvidia an attractive option for those with a focus on finance and long-term gains.
