Nvidia's stock has delivered exceptional results over the last two years. Following a gain exceeding 238% in 2023, shares have climbed roughly 164% so far this year. These consecutive strong performances have elevated the firm among the world's largest companies by market value.

The key question remains whether Nvidia can deliver another standout year of gains in 2025. The company has previously achieved returns of 30% or higher across three consecutive years on four separate occasions and posted gains of 50% or more for three straight years twice. While it has never recorded four successive years of 30% plus returns, it did experience five straight years of at least 25% growth between 2013 and 2017.

Here is why Nvidia appears positioned for continued solid results next year.

Strong demand for AI chips

Investment decisions around Nvidia hinge on spending for artificial intelligence infrastructure. Its graphics processing units serve as the foundation for AI systems because they handle numerous calculations simultaneously, making them well suited for training large language models and performing AI inference tasks.

As AI systems grow more advanced, they require substantially greater computing resources and additional GPUs to progress. Recent models from major developers were trained using ten times the number of GPUs compared with earlier versions.

Demand stems from large technology firms operating extensive data centers along with well capitalized AI ventures. These organizations are competing to develop superior AI capabilities, resulting in robust orders for Nvidia's latest Blackwell GPUs.

Expansion is projected to persist as leading customers signal plans for increased data center investments to support their AI initiatives. Several have noted that the primary risk lies in insufficient spending given the long term opportunity. One major provider anticipates continued growth in AI infrastructure over the coming five to ten years.

Image source: Getty Images.

Significant competitive advantage

Although other firms produce GPUs, Nvidia has established a substantial edge through its CUDA software platform. Originally created to accelerate graphics in gaming, the company developed a free programming tool that enabled developers to adapt the chips for broader applications.

Over time CUDA became the primary framework for GPU programming, reinforcing the company's position. Its GPUs' role in cryptocurrency mining further demonstrated their capabilities in demanding computing environments and laid groundwork for today's AI achievements.

Nvidia has continued advancing the platform by adding specialized libraries and services optimized for AI workloads. It has also accelerated its GPU release cycle to an annual pace to maintain technological leadership.

Competition from custom AI chips exists, yet these require lengthy design cycles and higher costs. Nvidia's offerings provide greater accessibility, lower expense, and integrated AI tools, positioning the company to retain its leading role in the sector.

Attractive valuation metrics

Another factor supporting further gains is the current valuation. Despite recent advances, the stock trades at a forward price to earnings ratio near 30 based on 2025 estimates and a PEG ratio of about 0.95. Ratios below 1 often indicate undervaluation for growth companies.

Data by YCharts.

Given recent revenue expansion of 94% year over year and expected 50% growth next year, the multiple appears reasonable. With AI adoption still early and a durable competitive position, the shares represent an appealing opportunity entering 2025.