If we’re trying to summarise the global stock market performance for 2024, it’s hard to ignore Nvidia (NASDAQ:NVDA) stock. The share price has soared 191% this year, propelling the market cap to a staggering $3.43trn. The focus turns to 2025, where all eyes will be on the company to help keep positive market sentiment going. Here’s what I think could happen next year.
A high benchmark
During the release of quarterly results throughout the year, Nvidia managed to beat analyst expectations. However, as the year went on, the size — percentage-wise — of the outperformance decreased as the firm kept growing. As I flagged up in November when the latest results came out, Q3 year-on-year revenue growth was 94%. The previous quarter revenue growth versus the 2023 comparable period was 122%. The quarter before was up 262% and the one before that 265%.
For 2025, I expect that growth versus the previous year will continue to shrink. There’s nothing wrong with this in theory, as it’s much harder to grow by triple-digit percentages given how large the company is. Yet the benchmark of growth expectations is likely to stay very high. Therefore, I think we could see the share price rally much less next year, as some investors are disappointed by a slower pace of growth.
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A continued rally
Even though the share price gains could be less than this year, I still expect positive returns for Nvidia stock. This is because the Blackwell chip, the largest GPU (graphics processing unit) ever built, that was revealed this year only started to be shipped in Q4. Therefore, the full benefit of sales should only be seen in quarterly results next year.
Further, AI spending on Nvidia products is still increasing. It’s not like we’ve reached peak capabilities or even peak adoption of AI from all sectors. So I think it’s likely that the investor excitement around AI stocks will continue to be a key theme for much of next year. This should help to keep Nvidia shares supported, as any dips will likely get bought quickly.
Putting the jigsaw together
So if I believe that the stock will struggle to impress investors but will be buoyed by continued AI excitement, what should I do?
My preference is to look for alternative stocks that could gain from this investor optimism around the sector. For example, Broadcom. The semiconductor company is up 120% this year, but 45% of that move has come in just the past month. I think some investors see Broadcom’s application-specific integrated circuits (ASICs) as a viable alternative for custom AI processors. As a result, I feel this stock could have more of a buzz around it than Nvidia going forward.
I’m not completely against buying Nvidia shares, but I feel there are better options out there that have more scope to rally. That’s why, for my portfolio, I’m looking for good options in the same sector that could have the time to shine in 2025.
