NVIDIA Corp (NASDAQ:NVDA, ETR:NVD), the world’s leading chipmaker, finds itself at a pivotal moment heading into 2025, with the stakes for its business and investors at an all-time high.
The company, which has seen its stock price rise more than 190% year-to-date in 2024, continues to dominate the AI infrastructure landscape, driven by its unparalleled GPU technology.
According to analysts at XTB, Nvidia’s financial performance this year has been nothing short of extraordinary. Annual revenues are expected to rise to more than $113 billion in 2024, up 152% year-over-year, with a gross profit margin of 76.1%. The numbers blow past industry norms, with Apple’s gross profit margin projected at 46.2% for the same period.
However, 2025 brings new challenges and opportunities, largely centered on the highly anticipated launch of Nvidia’s next-generation Blackwell chips. Designed to be faster and more energy-efficient, the Blackwell chips promise performance up to 2.5 times that of their predecessor, the Hopper chip, when it comes to training AI models.
Blackwell chip: hype meets hurdles
The launch of the Blackwell chips is not without complications. XTB highlighted production delays and technical issues, such as overheating in servers and initial design flaws, as hurdles Nvidia has had to overcome. "The problems faced by the Blackwell are down to the chip being almost too good and too advanced," analysts wrote.
Despite these setbacks, Nvidia CEO Jensen Huang remains optimistic, stating that demand for the new chips is "extremely strong." However, Huang refrained from offering long-term sales projections, sticking to Nvidia’s practice of providing guidance only one quarter out.
The stakes are high. "The market is likely to be laser-focused on the early uptake of Blackwell chips and the company’s forecasts for future revenues," XTB analysts noted. The February earnings report will be critical in setting the tone for Nvidia’s stock in 2025.
A double-edged sword of dominance
Nvidia’s dominance in the GPU market is unparalleled, with a 98% share. It remains the primary supplier to tech giants like Microsoft, Meta, Alphabet, and Amazon. In 2024, the so-called “Magnificent 7” increased their capital expenditures by $242 billion, a figure projected to rise to $285 billion in 2025, largely benefiting Nvidia.
However, this heavy reliance on a concentrated customer base poses risk. "Approximately 38% of Nvidia’s revenues come from Microsoft, Meta, Alphabet, and Amazon," XTB noted. If these companies were to scale back spending, Nvidia could face headwinds.
Volatility on the horizon
Despite its impressive growth, Nvidia’s stock has shown a pattern of sharp movements following earnings reports. After its last two earnings releases, Nvidia’s share price dropped by 7% in August and again in November. "The average move in Nvidia’s share price on the day after an earnings report is approximately 5%, far higher than Apple’s 1.5%," XTB wrote.
The broader AI trade, which has been a key driver of Nvidia’s success, is also expanding. "The AI revolution is not only dependent on Nvidia’s chips but also on energy," analysts noted. While Nvidia has fueled the semiconductor index’s 88% rise this year, the electricity index has climbed 46%, with energy companies like Vistra Corp outperforming.
The road ahead
As 2025 unfolds, Nvidia’s fortunes will hinge on the successful rollout of the Blackwell chips and the sustained spending of its core customers. While the AI trade shows signs of broadening, the company’s continued dominance in the GPU market positions it to maintain leadership in the sector.
Nvidia has been the firm favorite stock of the AI trade in 2024, but, as XTB analysts noted, there are signs that the AI trade is widening out.