Nvidia is closing out its second straight monster year — here’s what it needs for a three-peat

Nvidia’s stock soared 174% in 2024, building on its remarkable 239% gain from 2023, driven by continued strong demand for AI chips from major tech companies.

Performance metrics: Nvidia maintained impressive market momentum throughout 2024, despite experiencing multiple significant price corrections.

• The stock currently trades at a forward P/E multiple of 32.7, below its five-year average of 40.4
• Despite several 20% drawdowns during the year, the stock consistently rebounded on strong AI adoption sentiment
• As of late December, shares were trading 6% above their December 18 low of $128.91

Key growth drivers: Major tech companies’ substantial AI investments fueled Nvidia’s sustained growth trajectory.

• Microsoft, Google (Alphabet), and Amazon made multi-billion dollar AI-related capital expenditures
• These investments translated directly into revenue growth for Nvidia
• The company’s dominant position in AI chip manufacturing remained largely unchallenged

2025 focal points: The successful rollout of Nvidia’s next-generation Blackwell chip platform will be crucial for continued growth.

• Supply constraints are expected to persist for several quarters after the launch
• Investors will closely monitor gross margins during the transition period
• The company’s software business and international “sovereign AI” partnerships represent emerging growth opportunities
• Nvidia plans to preview its upcoming Rubin architecture at the March GTC conference

Potential challenges: Several factors could impact Nvidia’s performance in 2025.

• Any escalation in U.S.-China tensions could affect semiconductor trade
• Potential complications in the Blackwell platform rollout pose operational risks
• The adoption of custom AI chips by major tech companies remains a consideration, though currently a minor threat
• Supply-demand dynamics will need careful management during the Blackwell transition

Market positioning assessment: Despite growing competition in the AI chip space, Nvidia’s market leadership appears secure in the near term, though companies are actively seeking to reduce their dependence on Nvidia’s products.

The ongoing transition to the Blackwell platform, combined with expanding software and international opportunities, suggests continued growth potential for Nvidia, albeit with heightened attention to execution risks and geopolitical factors.