Nvidia Was One of the Largest Companies by Market Cap in 2024. Will It Continue to Succeed in 2025?

Nvidia (NASDAQ: NVDA), a leading semiconductor company, has seen its share price soar 500% over the past three years, pushing its market cap up to a staggering $3.6 trillion. While Apple was the largest company by market cap earlier this year, as I write this, Nvidia holds the spot.

Nvidia's rise has been fueled by its lead in the artificial intelligence processor market, but can Nvidia keep the good times going this year? I think so, and here's why.

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Nvidia is the dominant AI processor company

To understand why Nvidia can continue to reign in 2025, we first need to understand why it became a must-have AI stock.

Nvidia's graphics processing units (GPUs) were used by tech companies for years as they developed artificial intelligence systems. That was before OpenAI released ChatGPT in late 2022, which sparked an AI race. Nvidia's early lead in AI has now given the company a nearly uncrossable moat for artificial intelligence processors.

Nvidia has an estimated 70% to 95% share of the AI processing market, leaving rivals Intel and AMD far behind. And there's no sign that Nvidia is slowing its AI processor innovation pace. The company released its new Blackwell chip last year and said shortly thereafter that demand was already outstripping supply.

Nvidia CFO Colette Kress said on the company's third-quarter earnings call that "Blackwell demand is staggering, and we are racing to scale supply to meet the incredible demand customers are placing on us."

Morgan Stanley estimates that Nvidia will ship between 60,000 and 70,000 Blackwell B200 servers this year, with a price tag between $2 million and $3 million for each one. The point here isn't to nail down Nvidia's expected revenue perfectly, but the Morgan Stanley estimates -- combined with Nvidia's comments about demand -- show just how much potential the company has in AI processors for this year.

AI is accelerating

AI has been a dominant storyline in the tech space for a few years now, which might make it seem to some as if the time to invest has already passed. But AI's growth, and Nvidia's potential to benefit, likely aren't fully tapped out.

For example, the Trump administration recently announced $100 billion in data center spending led by Softbank, Oracle, and OpenAI. The AI infrastructure spending could be worth up to $500 billion over the next four years.

This investment could spur more growth for Nvidia as the company meets the demand for AI processors. Nvidia CEO Jensen Huang has been clear about his belief that data center spending is already accelerating, saying last year that infrastructure spending could double to $2 trillion over the next five years.

Is it too late to ride Nvidia's AI wave?

Even with Nvidia's massive share price gains over the past few years, I think there's still a case for buying the company's stock. We're still in the early innings of AI, and tech companies are just beginning to ramp up data center spending to keep up with each other.

Nvidia's shares have a forward price-to-earnings ratio of 32 right now, which is only slightly more expensive than the tech-focused Nasdaq-100's forward P/E of 26. While not exactly cheap, buying Nvidia's shares now allows investors to tap into one of the leading AI companies as this market continues to take shape.

Just in keep in mind that there could be more volatility on the way if certain AI investments don't pan out or if government restrictions are placed on AI developments.

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Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, Nvidia, and Oracle. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.