Nvidia (NASDAQ: NVDA) consistently crushed the market over the past few years. Its outperformance becomes even more impressive when viewed over even longer time periods.

However, 2025 will be a new year filled with both challenges and tailwinds. Can the stock keep up its outperformance?

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free ?

Nvidia's revenue growth is slated to decrease next year

Expect 2025 to be a far different year than 2023 and 2024 were for Nvidia. After its latest growth spurt, its year-over-year comparisons will be starting from much higher baselines. Because of this, its revenue growth rates (at least on a percentage basis) are not going to look as impressive.

In 2023 and 2024, Nvidia delivered unbelievable growth, with quarterly revenues sometimes tripling year over year.

That growth was directly tied to the artificial intelligence (AI) technology boom. With cloud infrastructure hyperscalers racing to develop functional and innovative AI models, and support other businesses' AI efforts, they are working to increase the computing power at their disposal at a rapid pace. Nvidia's graphics processing units (GPUs) are among the best hardware available for providing AI processing power, it has massively benefited from this build-out.

However, these hyperscalers are far from finished with their infrastructure expansions.

Meta Platforms stated that its capital expenditures in 2025 will be significantly greater than they were in 2024. The major cloud computing providers also stated they are spending massive amounts on infrastructure to meet the demand. For instance, Microsoft owns the second-largest cloud infrastructure service, Azure. On its most recent quarterly conference call, CFO Amy Hood said: "We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals."

With Nvidia's largest clients all signaling they will be spending more on capex in 2025 than they did in 2024, Nvidia's sales should keep growing next year.

But will that be enough to allow the stock to maintain its market-beating momentum?

2025 could bring a few headwinds to Nvidia

One of the biggest hurdles for Nvidia stock will be its valuation. The market already baked a lot of future success into the current share price, so it may be difficult for the stock to rise from its current position.

Nvidia's stock already trades for 35.7 times its expected earnings for its fiscal 2026 (which will end in January 2026). That would be a pricey valuation if it were the company's trailing earnings metric, and for that to become the case, Nvidia would have to meet Wall Street's expectations for the next five quarters or so while its stock price stayed essentially flat.

Additionally, the massive AI computing power build-out could weaken toward the end of 2025 if the hyperscalers feel they've added enough processing power to meet demand.

However, I don't think either of those things will occur. It's unclear how much computing power we'll need to reach the pinnacle of these AI models, but I doubt we'll find that limit in 2025. We're just getting to the point where these AI models are starting to be integrated, and there are still flaws with the ones available today.

The arc of rising demand for AI computing power will likely stretch out past 2025, so I'm unconcerned about the potential headwind of slumping GPU demand.

As for the company's valuation, however, I wouldn't be surprised if its premium starts to tick down due to "slower" growth, although the average projection from 52 analysts following the company is for revenue growth of 44% next year. This slower growth will likely decrease Nvidia's share price gains, but not to the point of being a market laggard.

Nvidia's stock price won't triple like it did in 2023 and 2024. However, I think the growth case is strong enough that the stock should be able to grow by at least 10% next year, making it a stock that investors should consider buying before 2025 begins.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $22,819!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,611!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $444,355!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks ?

*Stock Advisor returns as of November 11, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Can Top Artifical Intelligence (AI) Stock Nvidia Crush the Market in 2025? was originally published by The Motley Fool