This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
It's no secret that excitement surrounding artificial intelligence (AI) has helped propel technology stocks, and the entire market, to new highs over the last year. It's also no secret that semiconductor stock Nvidia (NASDAQ: NVDA) has witnessed unparalleled buying activity -- so much so, that it's now the third most valuable company in the world as measured by market cap.
But with shares soaring 140% so far in 2024 and 160% over the last 12 months, could Nvidia stock possibly be headed even higher?
Below, I'll explore some factors that could support the ideas of Nvidia stock moving both higher or lower over the next year. Let's dig into the full picture and assess what could influence Nvidia's price action. I'll make my final case for where I see Nvidia stock landing one year from now.
Nvidia stock could be headed higher, but...
Over the last couple of years, one of the biggest catalysts for semiconductor companies is demand for graphics processing units (GPUs). GPUs are an integral component for training large language models (LLMs) and myriad machine learning applications.
As it stands today, Nvidia is widely perceived as developing the best GPUs on the market. Its hardware roster featuring H100 and A100 chips is used by some of the largest companies in the world. Furthermore, Nvidia's next-generation GPUs, the Blackwell series, are finally set to hit the market following a brief setback due to a design flaw.
During Nvidia's second-quarter fiscal 2025 earnings call, CFO Colette Kress said, "Demand for Blackwell platforms is well above supply, and we expect this to continue into next year."
Kress said that Blackwell should generate "several billion dollars" of revenue during the fourth quarter. Considering the robust demand levels for Blackwell, I think it's reasonable to think that the bulk of these revenue tailwinds will trickle into fiscal 2026 (calendar year 2025).
As a result, I would not be surprised at all to see Nvidia stock experience some revived buying activity throughout the latter half of 2024 and into early months of 2025.
...this rise could be short-lived
Even if Nvidia shares experience a nice pop, I think concerns around competition could dent any euphoria surrounding the stock.
While Nvidia faces direct competition from the likes of Advanced Micro Devices, the company is also looking at rising opposition from other megacap tech companies. Some examples include:
- Amazon: While Amazon is mostly known for its e-commerce marketplace, the company is a massive force in the world of cloud computing thanks to Amazon Web Services (AWS). Over the last year, Amazon has invested billions into AI-related initiatives. Two big areas where Amazon has doubled down on its AI vision are an $11 billion data center project in Indiana as well as developing its own training and inferencing chips.
- Meta Platforms: Meta is a known customer of Nvidia. Per comments made by CEO Mark Zuckerberg, a good portion of Meta's capital expenditure (capex) budget has been geared toward buying H100 GPUs. However, Meta has also been designing its own chip, dubbed the Meta Training and Inference Accelerator (MTIA). I see this as a move to migrate away from Nvidia over time, and keep as much of Meta's technology stack internalized as possible.
- Tesla: Another known "Magnificent Seven" customer of Nvidia is Tesla. The company's CEO, Elon Musk, has referenced Nvidia's H100 GPUs as a critical piece of infrastructure in training the company's autonomous driving software. However, during Tesla's second-quarter earnings call, Musk stated that the company might have to compete with Nvidia in the future because "demand for Nvidia hardware is so high that it's often difficult to get the GPUs."
There are a couple of important ideas to unpack here. First, as more chips enter the competitive landscape, it's natural to think that Nvidia's growth could continue slowing. Moreover, a potentially bigger issue is that many companies seeking to disrupt Nvidia's dominance are its own customers.
To me, GPUs will eventually be seen as commoditised pieces of hardware. This will essentially force Nvidia to compete on price, and since many of its largest sources of growth are looking to move away from a reliance on its hardware, the company's sales and profits could start witnessing a dramatic deceleration.
This could lead to a normalization of Nvidia's stock price as its growth prospects become less attractive.
So, where will Nvidia stock be one year from now?
In addition to competition, I see a couple of other things that could impact Nvidia's stock price. As I recently expressed, I have some major questions over the company's $50 billion share buyback. I do not see this as an efficient use of capital allocation, and I think it could permeate into a broader narrative that negatively impacts the stock.
Furthermore, as murmurs continue about a possible investigation from the Department of Justice (DOJ) over antitrust concerns, it's very possible that some investors will dump Nvidia stock purely out of emotional fear.
I will admit that the buyback and the possibility of government intervention are longer-term issues surrounding Nvidia, but I think the ideas of both could impact the stock in the near term.
At the end of the day, I think Nvidia stock will experience a period of fleeting buying activity influenced by newfound growth inspired from Blackwell. However, I see these gains as short-lived as competition rises and question marks remain over the company's growth tactics. For this reason, I wouldn't be surprised if Nvidia stock is relatively flat overall one year from now.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
