The Nasdaq's Bright Future: Why Investors Should Consider Nvidia Before 2025

This investor favorite has been on an epic run over the past couple of years and shows no signs of slowing.

The Nasdaq Composite has experienced significant growth in recent years, fueled by advancements in artificial intelligence (AI), improving economic conditions, a stable political environment, and the Federal Reserve's recent moves to lower interest rates. After a remarkable 43% return in 2023, the tech-heavy index has further surged by around 30% in 2024. Historical trends suggest this impressive rally is likely to continue into 2025.

The current bull market kicked off on October 12, 2022. Although each market rally has its own characteristics, history provides valuable insights. On average, bull markets endure for over five years. Since this rally just entered its third year, there is a high probability the Nasdaq will keep gaining momentum next year. Additionally, the Nasdaq has posted positive returns 73% of the time over the past 53 years, indicating a favorable outlook for investors. Interestingly, the index has historically risen by an average of 12% after experiencing prior gains, hinting at more upward potential ahead.

Moreover, stock splits have become more popular in recent years, rekindling investor interest in companies that engage in this practice. Stock splits often precede strong sales and profit growth, and one prominent example is Nvidia (NVDA). Over the past decade, Nvidia's stock has skyrocketed by 26,920%, prompting the company to execute a 10-for-1 stock split earlier this year, following a 4-for-1 split in 2021.

Despite its recent surge, Nvidia's growth trajectory appears poised to continue into 2025. Here’s why.

The Role of AI in Nvidia's Success

The rise of generative AI has been phenomenal in the last two years, as businesses rush to tap into the productivity benefits these advanced algorithms deliver. Generative AI is skilled at drafting emails, summarizing information, mining data, creating original content, and even generating computer code, with daily discoveries of new applications. These capabilities enable the automation and streamlining of tasks, saving users valuable time and money, which in turn encourages widespread AI adoption.

Nvidia has been at the forefront, developing the graphics processing units (GPUs) essential for powering this technology. These specialized chips excel in processing large amounts of data simultaneously, which is crucial for AI tasks. Originally designed to produce realistic images in video games, Nvidia later recognized the broader applications for their technology, such as in data centers, high-performance computing (HPC), and machine learning—the precursor to modern AI.

A significant portion of AI processing occurs in the cloud and data centers, solidifying Nvidia's position in the market. The company reportedly commands 98% of the data center GPU market, according to semiconductor analysts. This dominant position has made Nvidia the leading name in AI processing.

A Closer Look at Nvidia's Financial Performance

To fully appreciate Nvidia's meteoric rise, examining its financial performance is crucial. After enjoying triple-digit growth in sales and profits last year, Nvidia has continued this remarkable trend. In its fiscal 2025 third quarter (ending October 27), Nvidia achieved record revenues of $35.1 billion, a gain of 94% compared to the previous year. The company's earnings per share (EPS) reached $0.78, up 111%, and for perspective, it earned more in one quarter than its total sales for all of fiscal 2022.

The star of Nvidia's success story has been its data center segment, which surged 112% year over year to contribute $30.8 billion of the revenue stream.

Analysts are optimistic that Nvidia's growth will persist. For fiscal 2026 (starting in late January), consensus estimates predict revenues of $195 billion, marking a year-over-year growth of 51%. Some estimates even suggest revenues could exceed $269 billion, which would represent an astounding growth of over 100%. Historically, Wall Street has been known to underestimate Nvidia's capabilities, making the true figures likely to fall somewhere between these estimates.

Why Nvidia Remains Attractive for Investors

Nvidia is preparing to launch its next-generation Blackwell platform shortly, and indications suggest it will once again claim the top spot in the market. An analyst from Bank of America, Vivek Arya, believes that the investment community is underestimating the significant demand for Blackwell, predicting it will outsell Nvidia's current Hopper chips within just a couple of quarters. He also highlights a discrepancy between Nvidia's actual market potential and how investors perceive it:

"They really are a system integrator at this point. They're selling complete racks with all the computing, the networking, the optical resources, the memory, everything thrown in. This is why their revenue generation opportunity is so much greater than what investors recognize."

Furthermore, Nvidia bundling software with its hardware systems illustrates the expanding opportunities within the company’s addressable market.

Even with its substantial gains—183% this year alone—Nvidia remains attractively priced. Estimates suggest that the company will achieve an EPS of $4.42 for fiscal 2026 (beginning in January), meaning the stock is valued at about 32 times forward earnings. This rate is relatively inexpensive given the vast opportunities ahead.

If one stock-split stock stands out as a must-buy before 2025, Nvidia would be that choice.

Nasdaq, Nvidia, AI