Artificial intelligence (AI) has been a hot investment theme for several years now. Since early 2023, AI stocks such as Nvidia (NASDAQ: NVDA), Amazon, and Alphabet have outperformed the market by a wide margin.
I’m expecting a lot of AI stocks to outperform again in 2025. And my prediction for Nvidia – which is spearheading the AI revolution – is that it will hit $200 this year.
AI is just getting started
The adoption of AI over the last two years has been incredible. ChatGPT, for example, now has around 460m visitors each month. Across the world, people are using this app to answer questions, write emails, plan trips, and much more. Here at the Fool, some of us have been having fun asking it for stock ideas (the results have been questionable).
What we’ve seen from AI so far is pretty basic, however. There’s much more to come.
In the years ahead, we’re likely to see AI go to the next level. I expect ‘AI agents’ – autonomous AI systems that can operate independently in the real world – to become a big thing. Businesses will be able to use these to automate their operations and lower costs. Meanwhile, consumers will be able to use them to plan their lives and assist with everyday tasks (scheduling appointments, booking flights, etc.).
I believe that this next phase of AI will be in focus in 2025. And I expect the share prices of companies offering genuine AI solutions (Microsoft, Amazon, Salesforce, Sage, etc.) to do well.
Nvidia at $200?
Zooming in on Nvidia, I’m targeting a share price of $200 in 2025. That would represent a gain of 43% from here.
There are several reasons I believe the stock can hit that price.
One is that Nvidia continues to roll out ground-breaking AI products. For example, earlier this week CEO Jensen Huang revealed the Cosmos world foundation model platform. This is a powerful software platform designed to advance the development of ‘physical’ AI systems such as autonomous vehicles (AVs) and robots. He also revealed a processor for AVs called Thor, solutions for agentic AI, and an AI supercomputer.
These kinds of products suggest that the company has tons of growth potential. AVs – which Huang believes will be a ‘multi-trillion dollar robotics industry’ – could be a huge revenue driver for the company, for example.
Another reason I’m targeting $200 is that the stock actually looks cheap today (despite the fact that it’s up 800%+ in two years).
For the year ending 31 January 2026 (FY2026), Nvidia’s earnings per share (EPS) are projected to rise 50% to $4.43. So, at today’s share price of $140, the forward-looking price-to-earnings (P/E) ratio is only 31.6.
That’s not high given the EPS growth. The price-to-earnings-to-growth (PEG) ratio is just 0.63 (a ratio under one suggests that a stock’s undervalued).
Now, let’s say that for FY2027, Nvidia can grow earnings by 30%. That would take EPS to $5.76. Apply a forward-looking P/E ratio of 35 to that and we have a $202 price target.
Of course, my forecasts here could be off the mark. If Big Tech companies like Microsoft stop buying Nvidia’s chips, its earnings growth could stall.
I’m very bullish on this stock, though. If it doesn’t hit $200 in 2025, I think it will hit it in the years ahead.
This post was originally published on Motley Fool
