The dramatic ascent of artificial intelligence giant Nvidia has sustained for two years. The stock's climb in year three depends on Blackwell, its next-generation AI chip platform.
Year-to-date performance: up 174%
Forward price-to-earnings multiple: 32.7 versus a five-year average of 40.4
Our rating: Buy-equivalent 1
Our price target: $165 a share
Nvidia YTD '24 look back
Nvidia followed up its remarkable 239% leap in 2023 with an encore performance. It all boils down to the fact that we continued to see massive investments into AI across the tech industry, leading to blistering revenue and earnings growth for a second straight year. Key customers including Microsoft, Google parent Alphabet and Amazon shelled out billions of dollars on AI-related capital expenditures, with much of the money making its way into Nvidia's coffers. There were patches of volatility -- in fact, the stock saw multiple drawdowns of roughly 20% or more -- but eventually, the buyers returned as optimism on Nvidia's future and AI adoption more broadly won out. December has brought more volatility, with the stock falling into correction territory before bouncing yet again. As of Friday, shares were up roughly 6% from their most recent low close of $128.91 on Dec. 18.
'25 look ahead
In the new year, Nvidia will be ramping up the rollout of its next-gen chip platform Blackwell, the successor to its wildly popular Hopper architecture. Investors will be closely watching how this transition unfolds -- are there any hiccups that delay when revenue is recognized? How will gross margins hold up during this process? Nvidia has said demand for Blackwell is expected to "exceed supply for several quarters" in its fiscal year that starts in February, so clues on when this mismatch is resolved will be in focus, too. Some of Nvidia's burgeoning opportunities -- specifically, its software business and partnerships with countries outside the U.S. on "sovereign AI" -- may also be harder to overlook in the new year. Another thing on Jim Cramer's radar is whether new types of AI-enabled hardware, such as robots, emerge. "I think '25 will be a big year for Nvidia," Jim said recently. "And I think Blackwell is going to ship in volume. I think people are forgetting what Blackwell does, which is video. When you have video, you can do robots." As important as Blackwell is, Nvidia also is expected to provide a glimpse at its upcoming Rubin architecture at its much-hyped GTC conference in March. It's the same venue that Nvidia used in 2024 to showcase Blackwell.
Risks to the Nvidia story in 2025 include an escalation of U.S.-China tensions -- given semiconductors have in recent years become a geopolitical cudgel -- and stumbles in the Blackwell ramp. Competitive dynamics around the adoption of custom AI chips remains something to watch. Right now, it seems like that is a bigger issue for fellow Club stock Advanced Micro Devices than market-leading Nvidia, but it still cannot be ignored. "Sure, every company wants to be less hostage to Nvidia. Maybe one day they will, but that day is nowhere near here," Jim said on the December Monthly Meeting.
(Jim Cramer's Charitable Trust is long NVDA and AMD. See here for a full list of the stocks.)
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