This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Nvidia (NASDAQ: NVDA) has been one of the best investments to own over the past few years. However, if you examine how the stock has performed in 2023 and 2024, it's clear that the second half of the year hasn't been as strong as the first half, though it's still been positive.
| Year | Performance (January-June) | Performance (July-December) |
|---|---|---|
| 2023 | 190% | 17% |
| 2024 | 151% | 8% |
| 2025 | 14% | ? |
Data source: YCharts.
In 2025, Nvidia's first half wasn't great, but does that mean it can flip the script and deliver a monstrous second half? Let's find out.
Several active trends could boost Nvidia's growth
Nvidia has risen to become the largest company in the world by market capitalization due to its involvement in the artificial intelligence (AI) arms race. Its graphics processing units (GPUs) are the top option in its space, and have achieved a 90% market share in the data center realm. That level of dominance is nearly unheard of in the hardware space, yet Nvidia's GPUs continue to lead the way.
It's also still growing at a healthy pace. In the fiscal first quarter, ended April 27, revenue increased 69% year over year, and management provided guidance for a 50% rise in Q2. However, one change caused Nvidia's results to be less spectacular than expected.
The Trump administration changed Chinese export regulations on Nvidia's H20 chips that were specifically designed to meet prior export regulations crafted under the Biden administration. This resulted in Nvidia losing $2.5 billion in revenue in Q1 and an estimated $8 billion in Q2. That's a huge blow, but it's possible that Nvidia could still sell these H20 chips to some clients that want a cheaper alternative to Nvidia's flagship product.
Furthermore, the U.S. and China are actively negotiating a trade deal, and access to Nvidia's GPUs could be on the table during these negotiations. If China cuts a deal that allows it to access these GPUs, Nvidia's stock could skyrocket in the back half of 2025. While this isn't guaranteed, it would be a huge catalyst for Nvidia's stock.
Europe could also emerge to take China's place. Europe has lagged significantly behind the U.S. and China in AI adoption, but that trend may be shifting. CEO Jensen Huang laid out the framework for launching Europe's AI boom, and this could be a significant source of growth for Nvidia, alongside the United States' insatiable demand for top-tier computing power.
Should this start to affect Nvidia's finances in the back half of the year, it could also send the stock soaring.
Lastly, companies will start to drop hints about 2026 capital expenditures during upcoming quarterly conference calls. If there's another round of record data center capital expenditures, Nvidia's stock could also move higher, as it will indicate that its GPUs remain in high demand in the U.S.
There are numerous potential growth catalysts for Nvidia's upcoming products, but the market is taking a wait-and-see approach. If signs start to pop up that Nvidia could see its business grow substantially in 2026, then the back half of 2025 could be a great time to own Nvidia's stock.
Nvidia's stock is far from cheap
The stock isn't cheap right now at 37 times forward earnings, but it's still below where it traded at this time during 2023 and 2024. Investors shouldn't be surprised if Nvidia's valuation skyrockets by the end of the year, given the anticipation of strong growth in 2026.
NVDA PE Ratio (Forward) data by YCharts
I think at least one of the catalysts discussed above will come to fruition, if not two. That combination will likely cause Nvidia's stock to soar in the back half of the year, far surpassing its performance at the start of the year. Nvidia remains one of my top stocks to buy now as we are still in the early innings of the AI infrastructure buildout.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
