There are more than two reasons why NVIDIA’s (NASDAQ:NVDA) stock price can rally another 30% or more in 2025, but the two that underpin the others are data center and automotive segment strength.
The data center segment, which houses AI-focused businesses, grew nearly 100% again in FQ4, and the automotive segment shows strength. It grew by 27% year-over-year and is considered the company’s next billion-dollar business, supported by demand for driver-assist, autonomous vehicle, and robotics technology.
Regarding AI, the demand for Blackwell products is unbelievable. Rubin is coming soon, and CEO Jenson Huang predicts a solid future for its GPU semiconductor business, with compute needs growing by 100x to meet the needs of the next-gen AI models. Together, they drive a robust outlook that includes slower growth but growth sustained at a double-digit pace, wide margins, strong cash flow, and an increasingly robust financial position.
Balance Sheet highlights at the end of the year include a 10% sequential increase in cash, more than $43 billion in cash on hand, a 70% increase in assets, and an 85% increase in shareholder equity. Regarding leverage, it is very low, with long-term debt running at 0.2x cash, a total liability of only 0.77x cash, and a nearly $11 billion net cash position.
The bottom line is that this company has the financial position to do whatever it wants, including advancing technology to support its growth while returning capital to shareholders. The capital return in 2025 isn’t large but sufficient to be interesting, and the outlook for increases grows quarterly.
Analysts Lift Consensus After NVIDIA’s Beat And Raise Quarter
NVIDIA’s Q4 was stellar despite weakness in only one segment: video games. The video game business remains weak, contracting by 22%, but will revert to growth soon, and the longer-term outlook is robust. Edge AI is expected to improve the performance of non-player characters, environment adaptability, and personalization.
It is only a matter of time until this business regains traction. Until then, Q4 revenue grew by 78% to outpace MarketBeat’s consensus estimate by 600 basis points. Datacenter grew by 93%, automotive by 27%, and Pro Visualization by 5%.
Guidance is also hot, with 2025 revenue expected to exceed $43 billion. The only bad news is that guidance is only 230 bps above the consensus at the time of the report, indicating strength is getting priced into the outlook. Even so, the company forecasts a hyper 65% growth pace for the quarter and another strong margin likely to increase the cash balance significantly.
The analysts’ response is mixed, including some downgrades and price target reductions, but the balance of activity is bullish. More analysts lifted their price targets or reiterated targets above the consensus, lifting MarketBeat’s reported consensus by roughly 150 basis points overnight. The 150 bps gain isn’t much but suggests a 28% upside from the pre-release closing price, and revisions lead to the high-end range, which is another 25% to 30% upside if reached.
NVIDIA’s 2025 Guidance Lifts AI Stocks Across the Board
NVIDIA’s initial market response was mixed with after-hours trading first moving lower than higher. The outlook ahead of the opening the following day is more bullish and indicates the uptrend in NVIDIA’s price action will continue. Up about 1.5% in premarket trading, NVIDIA’s market shows support at its 150-day EMA, but, more importantly, the news is also lifting other critical AI players like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Oracle (NYSE:ORCL). Their price action also shows signs of support that aligns with bullish markets and is a good sign for the S&P 500 index generally.
The critical resistance point for NVIDIA is the all-time high near $153, which may be broken before the end of Q1. In that scenario, NVIDIA’s stock price could quickly move above the $160 level. If not, NVIDIA’s price action could remain range-bound until later in the year, when and if new catalysts emerge, including Rubin and increasing auto-segment strength.