Anticipated S&P 500 Surge of More Than 9% in 2025: One Outstanding Stock to Acquire Prior to This Event Occurring
Anticipated S&P 500 Surge of More Than 9% in 2025: One Outstanding Stock to Acquire Prior to This Event Occurring
The S&P 500 index has achieved significant growth, increasing by approximately 27% this year as of now, and exceeding the 6,000 mark for the first time. Analysts at RBC Capital Markets and Barclays predict that the index could reach 6,600 by the end of 2025, representing a 9% increase from the current level. Additionally, other analysts such as Yardeni Research and Deutsche Bank anticipate the index reaching 7,000 by the end of 2025, while BMO Capital Markets forecasts a target of 6,700.
Factors contributing to the expected growth of the S&P 500 include decreases in inflation and strong development in the technology sector. Investors might benefit from closely examining a S&P 500 component that has shown remarkable advancements in 2024 and is predicted to repeat its performance in the following year - Nvidia (NVDA, 4.45%).
Nvidia can expect another noteworthy performance in 2025
Nvidia's shares have outperformed the S&P 500 index this year with remarkable gains of 180%. Despite facing pressure following the publication of its fiscal 2025 third-quarter results (covering the three months ending October 27), it may not take long for its growth trajectory to resume.
During the first nine months of the fiscal year, Nvidia reported a substantial revenue increase of 135% compared to the same period the previous year, reaching $91.1 billion. Additionally, the company's non-GAAP net income per share has jumped from $0.78 in the same quarter of the previous year to $2.10. Nvidia's projected revenue for its fiscal fourth quarter of $37.5 billion suggests a potential top line of approximately $129 billion for the fiscal year. Analysts predict an EPS of $2.95 for the fiscal year.
Based on the chart below, Nvidia is projected to maintain its remarkable growth momentum in 2025 as well.
It is not uncommon to see Nvidia's revenue and earnings growing at a pace faster than projected by the analysts. This is due to the significant demand for Nvidia's latest Blackwell artificial intelligence (AI) graphics processing units (GPUs), which are crucial for AI training and inference within major cloud companies.
Morgan Stanley recently reported that Nvidia had sold out its allocations of Blackwell chips for the subsequent 12 months. The company's growth in 2025 will primarily be limited by the number of chips it can manufacture, given the substantial demand. Consequently, Nvidia is actively working to boost the output of its Blackwell processors to fulfill as much demand as possible.
Reports have indicated that Nvidia has secured 60% of its foundry partner Taiwan Semiconductor Manufacturing's (TSMC) advanced chip packaging capacity. Notably, TSMC plans to double its advanced packaging capacity next year to cater to the escalating AI chip demand from companies like Nvidia.
Moreover, reports suggest that TSMC may increase its advanced chip packaging capacity from the current 36,000 units per month to 90,000 units in 2025. In 2026, the monthly output could potentially escalate to 130,000 units.
This all suggests that Nvidia will have a promising future, given the anticipated increase in demand for AI chips at an annual rate of 29% through 2032. This should enable the company to maintain its extraordinary growth pace in 2025 and then some.
The potential for further stock price increases remains
As indicated in the chart above, Nvidia's earnings could attain $4.41 per share in the subsequent fiscal year. However, the estimates have been on the rise over time. For instance, three months ago, analysts predicted Nvidia to achieve $3.83 per share in earnings for fiscal 2026. Fast-forward by one month, and the bottom-line prediction for the next year was $4.03 per share.
There is a good chance that Nvidia's earnings prediction for fiscal 2026 will continue to rise, largely due to the robust demand for its chips and the potential enhancement in the supply chain. The market may well reward its enhanced earnings potential with further growth, making it an appropriate time to purchase Nvidia. Currently, it is trading at 32 times forward earnings, which is lower than its five-year average forward earnings multiple of 41.
Assuming Nvidia can attain $4.50 per share in earnings next year and trade at a 40 times earnings multiple at that time, its stock price could surge to $180. This would represent a 30% increase from its current price, providing a persuasive reason to purchase it even after its impressive gains this year.
Given Nvidia's outstanding revenue growth and strong earnings projections, investors interested in the technology sector might consider diversifying their portfolios by investing in Nvidia's stocks. The company's remarkable 180% increase in shares this year and its potential to sell out allocations of Blackwell AI chips for the next 12 months indicate a bright financial future.
Furthermore, with analysts predicting a stock price surge to $180 if Nvidia can achieve $4.50 per share in earnings next year and trade at a 40 times earnings multiple, this could present an attractive opportunity for investors looking to capitalize on the potential for further stock price increases.