Technology stocks have been in scintillating form on the market in the past couple of years, which is evident from the 86% gains clocked by the Nasdaq Composite index during this period, and the good news is that the impressive run in tech stocks could continue in 2025 as well.
Historical trends show that the Nasdaq Composite has averaged gains of 17% in the year following a calendar year in which it logged 20%-plus gains. Meanwhile, the index has averaged an annual gain of 19% in a year following a year in which it clocked a 30% jump. It is worth noting that the Nasdaq Composite index is up just over 32% so far in 2024, as of this writing.
Of course, past performance isn’t a reliable indicator of what the future holds, but a closer look at the trends in the technology market indicates that the Nasdaq could indeed head higher in 2025. From strong economic growth in the U.S. to robust consumer spending to disruptive tech trends such as artificial intelligence (AI), there are multiple factors that could help tech stocks soar higher in the new year.
That’s why now would be a good time to take a closer look at two Nasdaq Composite components that have delivered outstanding gains in 2024 and could head higher in 2025 as well.
1. Nvidia: A new generation of AI chips can help it sustain its red-hot rally
Share prices of semiconductor bellwether Nvidia (NVDA 0.39%) are up 185% in 2024 as of this writing. The market has handsomely rewarded the chipmaker’s healthy top- and bottom-line growth, which has been driven by the sizzling demand for its AI hardware.
The impressive thing to note here is that Nvidia trades at an attractive 33 times forward earnings despite the stock’s solid surge this year. That isn’t very expensive when you consider that the tech-laden Nasdaq-100 index has a forward earnings multiple of 27, especially considering the pace at which Nvidia’s bottom line has been growing.
Consensus estimates compiled by Yahoo! Finance forecast a 128% increase in Nvidia’s earnings per share in the current fiscal year to $2.95 per share. That’s expected to be followed by a 50% jump in the next fiscal year (which will begin toward the end of January 2025 and will coincide with the majority of the calendar year) to $4.43 per share. However, as the following chart shows, analysts are more bullish about Nvidia’s bottom-line growth and have significantly raised their earnings-per-share estimates for the next fiscal year over the past six months.
Data by YCharts.
It won’t be surprising to see this trend continue in 2025. That’s because Nvidia’s new Blackwell processors will see a sharp production ramp-up next year. Morgan Stanley estimates that Nvidia could manufacture 250,000 to 300,000 units of its Blackwell chips in the fourth quarter of calendar 2024, generating between $5 billion and $10 billion in revenue.
The production of the Blackwell chips is expected to jump to a range of 750,000 to 800,000 units in the first quarter of 2025, indicating that Nvidia’s revenue from these chips could multiply. The production of the previous-generation Hopper processors is expected to drop from 1.5 million units in the current quarter to 1 million units in the first quarter of 2025.
As Nvidia gears up the production of its Blackwell chips and winds down Hopper, it should ideally see a big jump in its top and bottom lines. That’s because the company reportedly priced the Blackwell B200 processor at a premium of 60% to 70% when compared to the flagship Hopper chip, the H200. You might be wondering why Nvidia customers would be willing to pay such a premium for its latest chips, but the cost increment should be more than offset by the 4x performance gains that Blackwell is expected to deliver over Hopper.
As such, there is a solid chance that Nvidia could continue to outperform the broader market in 2025. Assuming it does achieve $4.43 per share in earnings next year and trades at 41 times forward earnings (in line with its five-year average), its stock price could go to $182. That would be a 35% jump from current levels. I wouldn’t be surprised to see this AI stock delivering stronger gains in the event of a bigger jump in its earnings as the market would likely reward Nvidia with a higher valuation.
2. Palantir: It’s up over 389% in 2024, and it could be at the beginning of a terrific growth curve
Palantir Technologies (PLTR 2.09%) has set the stock market on fire in 2024 with remarkable gains of nearly 390% as of this writing. This red-hot rally made Palantir stock quite expensive, which explains why only those investors with an appetite for risk and volatility should consider buying it right now.
After all, Palantir stock is trading at an expensive 422 times trailing earnings. Of course, its forward earnings multiple of 222 points toward a big increase in its bottom line, but it is still extremely expensive. Despite this, growth investors might still want to consider buying this hot stock.
Palantir is the leading player in the market for AI software platforms. Research and advisory company Forrester recently pointed out that Palantir is a leading provider of AI and machine learning (ML) software platforms, and it is “quietly becoming one of the largest players in this market” thanks to the rapidly growing adoption of the company’s Artificial Intelligence Platform (AIP).
So, Palantir seems on its way to making the most of a lucrative growth opportunity in the AI software platforms market, a space that’s expected to generate $153 billion in revenue by growing at a compound annual rate of nearly 41%. The company’s growing influence in this market is also evident from the acceleration in its growth in recent quarters.
Palantir’s growth could continue accelerating as both commercial and government customers have been quick to deploy its software platforms to integrate generative AI within their operations. The U.S. Army, for instance, recently extended its partnership with Palantir worth $400.7 million for a period of four years, which can be extended to a value of $619 million.
This is just one instance of customers increasing their usage of Palantir’s offerings. The company ended the third quarter of 2024 with a remaining deal value of $4.5 billion, which was a 22% increase over the year-ago quarter. This metric refers to the total value of contracts that Palantir has at the end of a quarter.
Analysts are forecasting a 25% increase in the company’s top line to $2.79 billion in 2025, so its remaining deal value points toward a solid revenue pipeline that should help it sustain its impressive growth in the future as well. Palantir’s earnings are expected to jump by 52% this year to $0.38 per share. The good part is that Palantir’s margin profile has been improving as it has been able to gain more business from existing customers, leading to strong unit economics.
PLTR Profit Margin data by YCharts
This combination of solid unit economics and the company’s robust revenue pipeline are the reasons why Palantir’s earnings-per-share estimates have been heading higher this year.
PLTR EPS Estimates for Current Fiscal Year data by YCharts
This trend could continue in 2025 and beyond as the company is currently scratching the surface of a massive growth opportunity in the AI software platform space. As such, Palantir stock could continue heading higher in the new year, which is why growth-oriented investors may still want to buy it even after the outstanding gains it has delivered in 2024.
