Nvidia Stock Rallied 39% in 2025. This Year, It Could Go Much Higher

Core Insights - Nvidia has shown resilience despite facing significant challenges in 2025, rewarding patient shareholders with a notable stock recovery [2][12] - The company experienced a stock decline of 37% initially, followed by a remarkable recovery of 38.9% by year-end, outperforming the S&P 500 [2][12] Group 1: Challenges Faced - Nvidia faced high expectations after two years of triple-digit growth driven by AI demand, leading to investor nervousness about potential growth deceleration [4] - Concerns about competition from DeepSeek's R1 reasoning model and the impact of tariffs on GPU demand were ultimately unfounded [5] - The ban on AI chip sales to China posed a significant hurdle, particularly after the Trump Administration's restrictions on Nvidia's H20 AI chips [6] Group 2: Growth Catalysts - Contrary to expectations, Nvidia's revenue and profits continued to grow, with Q3 fiscal 2026 revenue reaching $57 billion, a 62% year-over-year increase, and EPS rising 67% to $1.30 [7] - The company anticipates Q4 revenue of $65 billion, projecting an 84% growth rate, indicating strong future performance [7][8] - Nvidia's CEO announced that the next-generation AI chips, Vera Rubin, are in full production ahead of schedule, promising a 90% reduction in AI inference costs compared to the current Blackwell chip [9] - CFO confirmed that the previous revenue estimate of $500 billion by the end of 2026 was conservative, suggesting even higher future revenues [10] Group 3: Market Opportunities - Reports indicate that China may soon approve imports of Nvidia's H200 chips for select customers, potentially generating $50 billion in annual sales despite restrictions on sensitive uses [11] - Nvidia's stock is currently attractively priced at less than 25 times next year's expected earnings, suggesting a favorable investment opportunity [12]