Market-leading tech giant Nvidia (NVDA) — a primary supplier of AI infrastructure chips globally — has assuredly become one of the most lucrative stocks in the world. Based on my analysis, its strong returns are not over yet, with Nvidia stock priming for a test of $200 per share by the end of 2025 and potentially above $250 by the end of 2026. Given its price action and fundamental performance metrics, I am strongly bullish on Nvidia, at least for the next 12 months.
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Nvidia’s Valuation is Low-Key Despite Stellar Share Price
A quick glance at a price chart shows NVDA growing from around $11 per share in late 2022 to nearly $140 today. This time last year, NVDA traded at below $100 per share.
Several analysts have voiced concerns about valuations overshooting their mark. While it’s true that Nvidia has been prone to bouts of short-term speculation, in broad terms, the stock remains fairly valued. A case in point is the tech company’s sub-50 price-to-sales ratio, which it has maintained for over a year.
Compared to the quantum computing industry, which, on average, delivers superlative revenue growth, a price-to-sales ratio of 50 is considered among the lowest. Indeed, many quantum computing companies, like Rigetti (RGTI), currently sport price-to-sales ratios of over 100, with Rigetti’s P/S ratio peaking at 250 in recent times as market sentiment continues to grow — sometimes a bit too exuberantly.
Moreover, NVDA’s lower multiples compared to other quantum computing companies are not what validates its valuation. Instead, it’s the fact that, unlike other quantum computing companies, NVDA has consistently sustained its historical P/S ratio of 25. According to NVDA’s regulatory filings, its P/S ratio is currently 30, which indicates a manageably low deviation from its historical average and suggests long-lasting bullish sentiment for the stock.
Nvidia Gets Set for Appreciation
Although I am bullish on NVDA stock, this does not inherently mean it is suitably positioned as a long-term holding. Savvy investors are aware that Nvidia is exposed to cyclical demand dynamics, which means that before 2030, the tech giant could suffer a revenue decline as Big Tech companies taper off AI infrastructure capital expenditures.
Therefore, I consider it essential for investors to prepare for this in advance, as such a revenue decline could precipitate a significant stock re-rating. During the dot-com boom, we saw similar sell-offs with Cisco (CSCO). However, Cisco had a price-to-earnings ratio of around 200 at the time, compared to around 50 for NVDA today. Given these factors, Nvidia’s potential stock price decline — if materialized — is likely to be softer on investor portfolios than the share price declines of its peers.
Looking at the medium-term horizon, Nvidia’s slower fundamental growth rates alone could cause stock price volatility toward the end of 2025. To illustrate this, consider that the company’s year-over-year revenue growth for 2026 has been forecast at 50% by Wall Street analysts, compared to just 20% for 2027.
Although I expect the company’s market cap to grow in 2026 and 2027, I expect future volatility in NVDA’s performance results. Earnings calls could become strong price catalysts over this year.
Market Forecasts Put Sparkle in NVDA
Although I only plan to hold NVDA shares for another year due to its growth schedule becoming harder to justify beyond 2025, I think the stock remains a sound long-term investment for the next two years. Holding an NVDA position for the long term helps protect capital from the company’s impending revenue decline and could spell formidable returns later this year.
To validate the bullish sentiment surrounding NVDA and sustain its ongoing uptrend, consider that the company must post $240 billion in revenue and 24.7 billion diluted shares outstanding, equaling $9.70 in revenue per share, at its next earnings call on February 26th. In addition, it will need to trade at the midpoint of its five-year average price-to-sales ratio (27.5). My calculations indicate that if NVDA trades at a price-to-sales ratio of 25, the stock’s fair value would be $240 per share.
Is Nvidia a Buy or Hold?
Turning to Wall Street, NVDA has a Strong Buy rating based on 36 Buys, three Holds, and zero Sell ratings. That’s right, not a single Wall Street analyst rates this stock as a Sell. The average NVDA price target is $176.86 per share, indicating a 28.43% upside potential over the next 12 months.
AI Powerhouse NVDA to Power Past $200 in 2025
NVDA is currently one of the most actively traded stocks in the world, with an average daily trading volume of 201.19 million shares. Sometimes, when stocks reach for the highs on substantial volume, it can indicate investors missing the boat and establishing positions at overpriced levels. However, in the case of NVDA, value investors should be confident because a stock rising on heavy volume sporting strong fundamentals typically indicates a firm conviction among buyers despite the toppy levels at which the stock is trading. With my personal $200 per share price target coming into view, I remain aligned with the Wall Street consensus that Nvidia is a lucrative stock worthy of addition to any tech-leaning portfolio.
