Bloomberg recently reported the U.S. could impose caps on exports of advanced artificial intelligence (AI) chips to some Middle Eastern countries. Semiconductor fabrication equipment maker ASML lowered its 2025 guidance. Both were widely viewed as bad news for Nvidia (NASDAQ: NVDA).
Is Nvidia's huge multiyear run nearly over? I don't think so. Instead, I predict that Nvidia's share price could be headed to $175 in 2025.
Why a 30% gain is achievable
Nvidia's stock would have to jump 30% to reach $175 next year. I believe this gain is achievable for three key reasons.
First, the shift to accelerated computing appears to be unstoppable. This trend should easily offset any negative impact on Nvidia from restrictions on shipping advanced AI chips to some Middle Eastern countries. During the first half of 2024, only 6.5% of the company's total revenue came from countries other than the U.S., Singapore, Taiwan, and China. Middle Eastern revenue is only a portion of that percentage.
But what about ASML's weaker outlook? I suspect it's more related to overcapacity at factories that manufacture chips than anything else. Just because the demand for chipmaking equipment declines doesn't necessarily mean that the demand for chips will fall, too.
Second, Blackwell is coming. Nvidia CEO Jensen Huang told CNBC the demand for its new GPU platform is "insane." Morgan Stanley learned in a meeting with Nvidia's management that Blackwell GPUs are already sold out for the next 12 months.
Huang has said in the past that Blackwell could be the most successful product in Nvidia's history. I think he could be right. As Nvidia begins to report sales numbers for Blackwell in the next few quarters, I expect the stock to rise.
Third, look for Nvidia to announce its next generation of AI chips sometime next year. Even if the company doesn't begin shipping these chips until the end of 2025 (or even early 2026), investors' excitement about the next big GPU advance could provide a catalyst for the stock.
Many on Wall Street don't agree (yet)
Granted, many Wall Street analysts aren't nearly as bullish. The average 12-month price target reflects an upside potential for Nvidia of around 10%.
Of the 38 analysts surveyed by financial data provider LSEG in October, 15 rated Nvidia as a "hold." Another recommended selling the stock. That's a marked change from September, when 55 of 60 analysts rated Nvidia as a "buy" or a "strong buy."
However, I've noticed a pattern with Wall Street recommendations and price targets for Nvidia. The consensus tends to be modestly optimistic until the company reports its next quarterly results. Then, analysts frantically scramble to revise their estimates upward.
I fully expect that history will repeat itself as we move into 2025. As Nvidia reveals its sales figures for Blackwell, my hunch is that the average price target for the stock will increase significantly -- and perhaps to my predicted level of $175.
What could go wrong?
Of course, my prediction could fall flat on its face. What could go wrong? Several things.
The U.S. economy could run into trouble. An escalation of tensions around the world could negatively impact Nvidia's business. Major cloud service providers could choose to scale back their investments in GPUs. They could also shift some of their spending to buy chips from Nvidia's rivals or rely more heavily on their own AI chips.
While I acknowledge these risks, I stand by my prediction. Nvidia's share price could reach $175 next year. How long it stays at or above that level, though, is another question.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
