Nvidia (NASDAQ:NVDA) has been one of the best stocks to own over the past two years, returning 239% in 2023, 169% so far in 2024, and over 800% since the start of 2023. That’s quite an achievement, and many investors are asking perhaps whether the year will be three of his runs will also be profitable.

While doubling or tripling the stock is not the case probably If that happens, a modest gain, such as topping $200 per share, could be on the horizon. So could Nvidia do this? Finally, a stock price of $200 at the end of 2025 would represent a 50% increase from today’s price.

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Understanding why Nvidia has been a successful stock is crucial because it will help investors understand whether these trends are sustainable. Artificial intelligence (AI) has been a big driver of the entire stock market, and few companies (if any) have benefited from it as much as Nvidia.

Nvidia makes graphics processing units (GPUs) that are used to train and run AI models. Because they can process calculations in parallel, they can process information much faster than a standard CPU on a laptop or phone. Additionally, multiple GPUs can be connected in clusters to achieve incredible processing speeds.

In the last two years, almost all major tech companies have purchased thousands (if not hundreds of thousands) of GPUs from Nvidia, which is why sales have skyrocketed.

Nvidia’s margins also increased in this run, as its profit margin rose from around 30% to over 55%. These two factors caused Nvidia’s profits to skyrocket, which drove up its stock price.

The question is, how long will these catalysts last? After all, no company can sustainably maintain its revenue doubling year after year.

Of course, with Nvidia’s year-over-year results struggling, its growth rate will slow, which is what we’re seeing now. In the second quarter of fiscal 2025 (ending July 28), Nvidia’s revenue increased 122% year-over-year. That’s down from the 262% growth achieved in the first quarter. The same is likely to continue in the third quarter, as management expects revenue of $32.5 billion, up 80% year-over-year.

Make no mistake; These are incredible growth numbers, but they slow down from the rapid growth that investors have become accustomed to in 2023 and 2024.

According to Wall Street analysts, the growth trend will continue in 2025. For fiscal year 2026 (ending January 2026), Wall Street analysts expect growth of about 43%, which is still quite impressive for Nvidia’s size. They also expect earnings per share growth to match revenue growth, rising 43% next year.

The story continues

While market sentiment and valuation can influence stock performance in the short term, in the long term stock prices tend to follow earnings growth. So since we expect Nvidia to surpass $200 per share in 2025, representing 50% growth, it looks like Nvidia has a good chance of reaching that level.

Additionally, Nvidia also boasts a premium rating.

Nvidia stock trades expensively at 62 times trailing earnings and 33 times fiscal 2026 earnings. Both levels represent premium valuations and are expected to decline throughout 2025 as growth slows.

So for Nvidia, valuation expansion will not be positive, and its growth will not reach the levels required to reach a stock price of $200 per share. However, 50% is a lofty goal. If you shift the expectation to “Can Nvidia beat the market in the future?” then the entire analysis will change.

I believe Nvidia has the growth needed to deliver market-beating returns (over 10% per year), making it a solid stock. However, don’t expect the stock to double (or reach $200) any time soon.

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

Will Nvidia hit $200 in 2025? was originally published by The Motley Fool