Nvidia‘s (NVDA 0.35%) Shares soared 16% to a new all-time high on February 22 after the semiconductor maker’s latest earnings report beat Wall Street expectations. Revenue for the fourth quarter of fiscal 2024, which ended Jan. 28, rose 265% year over year to $22.1 billion, beating analysts’ expectations by $1.6 billion. Adjusted earnings rose 486% to $5.16 per share, beating consensus estimates by $0.52.
For the full year, adjusted EPS increased 288%, and NVIDIA’s revenue rose 126% to $60.9 billion. This represents a remarkable acceleration from flat sales growth and his 25% decline in adjusted earnings in fiscal 2023.
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Over the past 12 months, Nvidia is up 280%, with a market capitalization of $1.96 trillion, making it the third most valuable company in the world. microsoft (MSFT -0.32%)worth $3.06 trillion, apple, worth $2.85 trillion. So does NVIDIA have a realistic goal of overtaking Apple and taking the throne from Microsoft by 2025?
Why is Nvidia growing like a weed?
Nvidia’s recent rapid growth has been driven solely by the explosive growth of the artificial intelligence (AI) market. Nvidia’s top-tier data center GPUs are used to handle complex AI tasks more efficiently than standalone CPUs, and to keep pace with the growth of generative AI platforms like OpenAI’s ChatGPT, enterprises are I competed and bought these chips.
All of the world’s leading AI-driven companies – including OpenAI, its top backer Microsoft; Amazon, alphabetGoogle, and meta platform –Uses Nvidia’s GPU. The company’s GPU sales to China have been constrained by export restrictions over the past year, but market demand still significantly outstrips supply.
Nvidia generated 78% of its revenue from data center chips in FY2024, but only 56% of its revenue in FY2023. This rapid expansion has curbed its reliance on gaming GPUs, which previously generated most of its revenue. The PC market is slowing down after the pandemic, and the cryptocurrency mining market is unstable.
How much will Nvidia be worth in 2025?
Bulls believe Nvidia will continue to dominate the AI market despite its rivals. AMD enters with cheap data center GPUs, and cloud giants like Meta and Google begin developing their own first-party AI GPUs. Based on these rosy expectations, analysts expect Nvidia’s revenue to grow at a compound annual growth rate (CAGR) of 35% from fiscal 2024 to fiscal 2027, and EPS to grow at a CAGR of 37%. I expect that.
Nvidia stock isn’t cheap, with a forward P/E ratio of 35 times and 18 times this year’s sales, but compared to its growth rate, it appears to be a reasonable value. If the company maintains these valuations, meets analyst expectations, and trades at 35 times forward P/E by the beginning of fiscal 2027 (starting in January 2026), the company’s stock price will be 1 share. It is worth $1,085 per share, giving it a potential market capitalization of around $2.7 trillion. This would be an increase of nearly 40% from current levels.
But is it worth more than Microsoft?
Nvidia has repeatedly exceeded analyst expectations over the past year, so these vague long-term forecasts should be taken with a grain of salt, but they do mean the chipmaker could be worth more than Microsoft by 2025. suggests that it is low.
Microsoft has also taken advantage of the explosive growth in the AI market through major investments in OpenAI and the integration of generative AI tools into its cloud-based services. Analysts expect sales and profits to grow at a CAGR of 15% and 17%, respectively, from fiscal 2023 (ending June last year) to fiscal 2026.
Like Nvidia, Microsoft also trades at a forward P/E of 35x. If it maintains this premium multiple and matches Wall Street expectations, it could trade at around $550 by early 2026, giving it a market cap of $4.1 trillion.
Looking beyond Nvidia’s market cap
Simply put, NVIDIA won’t be able to catch up with Microsoft unless the bulls suddenly bid its valuation to an unsustainable level or Microsoft drops the ball and is revalued as a low-growth company.
Rather than wondering if either of these scenarios will happen, investors should focus on NVIDIA’s growth potential rather than its market capitalization. The company is still selling picks and shovels for the AI gold rush, and there’s still plenty of room left before long-term headwinds like AMD’s GPUs and first-party chips materially impact the company’s growth. There may be room for management.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Randi Zuckerberg is a former Facebook head of market development and spokesperson, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Leo Sun has held positions on Amazon, Apple, and Metahis platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and his Nvidia. The Motley Fool recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
