Nvidia stock has had a slow start to 2025 after back-to-back years of triple-digit gains — and that could soon become the new normal.
Shares have climbed 2.6% to $137.71 so far this year — meaning the chip maker is only just outperforming the S&P 500, which is up 2%. Last year, Nvidia soared 171%, while the benchmark index rose 23%.
That doesn’t mean investors should worry. Nvidia still dominates the market for the graphics processing units required to power artificial-intelligence programs — so its profit should keep rising as long as tech companies keep dipping into their pockets to splash the cash on AI.
But there’s a sense on Wall Street that another year of eye-popping returns looks unlikely. The 66 analysts who cover Nvidia have set an average price target of about $176, according to FactSet data, which implies shares can climb 28% from their level as of Friday’s close.
Morningstar analyst Brian Colello is more bearish than most. He rates the stock three stars out of five, and estimates a fair value for it would be $130. He told Barron’s that AI spending won’t rise at such a fast pace again this year, with Big Tech companies likely wary that a sharp increase in capital expenditure could weigh on their own stock prices. Nvidia doesn’t disclose its customers, but it’s widely believed the list includes the cloud-computing divisions of Microsoft, Amazon.com, and Google parent Alphabet.
“Quite frankly, to get 100%-plus gains again would take a massive, massive increase in AI spending,” Colello said. “I don’t think we’ve seen those sort of bullish signals from Microsoft, Google, Amazon, Elon Musk and others, and I think the Street has a much better handle on spending now.”
He added: “There’s always been talk of an AI bubble — and I don’t think it’s a bubble, the spending is real. But at some point, the cloud companies have an incentive to optimize their spending.”
Investors got a sense of how that optimization could weigh on Nvidia shares last year. In July, Alphabet’s ballooning capital expenditure dragged down its stock price — and Nvidia got caught up in the selloff, dropping about 3% on the expectation that the Google parent would end up reining in its spending on AI chips.
If that comes to pass in 2025, then it will be a tall order for Nvidia to deliver the stellar returns investors have become used to.