The red-hot rally that started in shares of Nvidia (NASDAQ: NVDA) toward the end of 2022 is now almost two years old, and the chip giant has delivered 11x gains during this two-year period.

So, an investment of just $100 made in Nvidia stock a couple of years ago is now worth more than $1,100. More importantly, it appears that the company’s phenomenal run could be sustainable in 2025 as well, thanks to the developments in the artificial intelligence (AI) chip market.

Here, we will take a closer look at the reasons why Nvidia’s stunning run may continue next year.

Strong Blackwell demand and improving supply will be tailwinds for Nvidia next year

Consensus estimates forecast Nvidia to end the ongoing fiscal year 2025 with $125.5 billion in revenue, which would be a 125% increase from the previous year. However, analysts at KeyBanc are forecasting the company’s revenue to come in at $130.6 billion in the current fiscal year (which will end in January 2025).

KeyBanc points out that Nvidia is on track to deliver stronger growth this year thanks to the sales ramp of its new Blackwell AI processors. That’s not surprising, as Nvidia management pointed out on the recent earnings conference call that it expects “to get several billion dollars in Blackwell revenue” in the fourth quarter of fiscal 2025.

At the same time, Nvidia believes that the sales of its current-generation Hopper chips, the H100 and H200 processors, are on track to increase in the second half of fiscal 2025 on the back of strong demand and improved supply. KeyBanc analysts also point out that the demand for these Hopper chips is extremely strong.

Even better, Nvidia’s suppliers are taking steps to ensure that the chip giant is able to fulfill more orders. For instance, contract electronics manufacturer Foxconn has announced that it is building the world’s largest production facility for Nvidia’s GB200 Grace Blackwell Superchip. This particular chip consists of two of Nvidia’s B200 Tensor Core GPUs (graphics processing units) that are connected to its Grace CPU (central processing unit).

Each Nvidia GB200 Superchip is expected to be priced between $60,000 to $70,000. More importantly, the server systems manufactured using multiple GB200 Superchips are in robust demand. Nvidia reportedly increased its orders for the Blackwell GPUs by 25% in July this year, and Foxconn’s announcement suggests that demand remains robust.

Market research firm TrendForce estimates that Nvidia could ship 60,000 units of GB200 NVL36 servers next year, and this particular configuration reportedly commands an average selling price of $1.8 million. What that means is that Nvidia may be able to sell $108 billion worth of its GB200 NVL36 servers next year.

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Meanwhile, Japanese investment bank Mizuho is forecasting sales of 6.5 million to 7 million units of Nvidia’s AI graphics cards next year, suggesting that the company could pull in close to $200 billion in data center revenue in calendar 2025 (which will coincide with the majority of its fiscal 2026). If that indeed happens, Nvidia could be well on its way to smashing analysts’ revenue expectations for the next fiscal year.

The stock seems built for more upside in 2025

As the chart shows us, analysts are expecting Nvidia to clock $177 billion in revenue in fiscal 2026.

The estimate has moved substantially higher as the year has progressed. So, there is a good chance that it could indeed breach the $200 billion mark going forward, considering the potential revenue that Nvidia is expected to generate from sales of its data center chips alone. That healthy jump in Nvidia’s revenue is set to translate into impressive earnings growth as well.

Analysts are expecting Nvidia to post $4.02 in earnings in fiscal 2026, up 41% from this year’s projected earnings of $2.84 per share. However, next year’s earnings estimate has moved up significantly in the past 90 days. Three months ago, consensus estimates were projecting $3.69 per share in earnings from Nvidia for the next fiscal year.

In all, Nvidia seems well placed to sustain its healthy growth next year as well. The stock has a median 12-month price target of $150, per 65 analysts covering it, pointing toward a 13% upside from current levels. However, the Street-high 12-month price target of $203 would translate into 53% gains from where this AI stock is right now, and it won’t be surprising to see Nvidia approaching that mark in 2025 thanks to the points discussed.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Where Will Nvidia Stock Be in 2025? was originally published by The Motley Fool